Davenham secures £215m refinance package

MANCHESTER finance house Davenham has secured a £215m refinancing package as it ploughs on with overhauling the group.

The news saw its shares soar 21% in early trading to 14.25p. 

Davenham, which provides loans of up to £5m to small and medium-sized companies, has been hammered by the downturn and has axed more than 30% of its workforce.

Its property portfolio has also taken a battering and, following a comprehensive review, Davenham has been forced to write down assets of £31m which will plunge the group into the red when it announces its interim results on Thursday.

Chief executive David Coates said following the review, the group has decided to focus on its asset and trade finance divisions, whilst optimising recoveries from its property business.

Since updating the market last October when its share price plunged 75%, Davenham has stopped writing new facilities in property and is applying highly selective criteria to trade and asset lending, to exclude new small ticket leasing and professional loans facilities.  It has closed sales offices in Scotland, Liverpool and Bristol.

Following these actions, the overall loan book has reduced from £284m at 30 June 2008 to £221m at close of business last night. Davenham now expects to save around £3.1m a year.

Davenham has agreed a new two year facility to 31 March 2011, which is tailored to support the asset and trade divisions’ working capital requirements. Royal Bank of Scotland led the syndication of banks.

Mr Coates said: “’The board’s decisive action in changing Davenham’s strategy has enabled the group to reduce its credit risks, operating costs and financial leverage as well as to optimise its property recoveries, thereby delivering the group to a position where it has successfully gained the support of its banking group.

“The economic environment remains challenging but our successful refinancing positions Davenham to deliver on its new strategy.”