Shares suspended at Erinaceous

Erinaceous, the property services firm, has called in administrators KPMG after its shares were suspended on the stock market.

Last month, the firm warned that any successful financial restructuring would almost certainly wipe out all value for shareholders. The shares ceased trading at 1.65p.

Jim Tucker and Myles Halley from KPMG said they had agreed to sell Erinaceous Insurance Services, a profitable branch, to a vehicle formed by the group’s banks.

Following an acquisition spree, the company built up debt of £250 million. Its board had been looking to restructure the debt, raise new capital and offload parts of the business, none of which proved viable in the current economic climate.

The company’s four larger subsidiaries (residential management, property maintenance and two insurance divisions) are outside the insolvency process and make up around half the group’s 4,000 staff.

KPMG said it was too early to say how many staff would be affected, although the sale of the insurance businesses to a consortium owned by Erinaceous’ banks is expected to be completed within days.

Mr Tucker said Erinaceous has grown significantly through acquisition over the last few years. Although the insurance division continues to perform well, the rest of the group has struggled to integrate its acquisitions and has been loss-making.

Last year, the company was in takeover talks with several bidders. However, prospective buyers pulled out following the credit squeeze.

In the first six months of last year, the group swung to a £3.9 million loss, compared to a £12 million pre-tax profit the previous year. This resulted in the group’s previous management team stepping down late last year while Chairman Nigel Turnbull departed in February.

A spokesperson for the company said given the extent of the challenges facing the group and the current state of the capital markets it has not been possible for the group to reach an agreement with its lenders and other creditors and therefore the board has now concluded, with regret, that it is necessary for the Company to file for administration.

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