Barclays, one of Connaught’s bankers, has sold its £19 million loan to hedge funds specialising in distressed companies, for just 37 pence in the pound according to the Financial Times today.
The loan was apparently sold to a number of hedge funds, which specialise in buying debt from banks exposed to failing companies or those in financial trouble.
Connaught previously said its net debt was around £120m but is now reviewing this figure as part of an internal review of its accounting policies.
While Barclays has sold its exposure to the firm at a knock down price, Allied Irish Bank, another member of the banking syndicate, it said to have sold its loans to another member of the group.
The bankers could be selling their exposure to the firm to avoid taking an equity stake, should the group need a refinancing of its debt, leading to a debt for equity swap.
There are a number of alternative routes the firm could take to get itself back on an even keel, including asset sales, a rights issue or a debt for equity swap with its bankers.