ABERDEEN ASSET Management, which has seen four of its investment trusts collapse into receivership this year and is under investigation by the FSA, yesterday revealed plans to ease the strain on its troubled balance sheet by raising pounds 70m from floating its property business.
The market responded positively to the announcement and shares closed up 27 per cent at 58p. Shares in Aberdeen have slumped from a high of 400p at the start of the year to a low of 26.5p as its split capital investment trusts got in to trouble.
Aberdeen Property Investors (API) manages around pounds 6bn of assets and represents 26 per cent of the group's assets under management. It was created from the acquisition of three property fund managers over the past two years at a cost of around pounds 43m and the company is now valued at around pounds 120m. Aberdeen will retain between a 30 and 50 per cent stake in the business, leaving its gains from the sell-off at around pounds 70m. API's chief executive, Iain Reid, will lead the flotation, which HSBC is advising upon.
The money raised will go to reducing the company's substantial debts, estimated at pounds 250m, pounds 110m of which is short-term bank debt. This had led to concerns over the group's liquidity and fears it was at risk of breaching its banking covenants.
Although the money raised from API will help to reduce the group's crippling debts, analysts are worried that its problems are far from over. Senior executives of the group were this week grilled by MPs over the failure of their trusts and whether they were responsible for misleading investors, who have lost thousands of pounds, over the risks inherent in the funds. …