Can the banks hold out for a new Power deal?

THERE are now stark choices facing the syndicate of banks which are owed £190 million by Power Corporation, over the next few weeks, or even days. Following the pull out of a restructuring deal by British investor, Mr John Beckwith, one of the 12 banks involved is understood to have threatened to call it a day. Others, it seems, are prepared to let it run for a little while longer to see if another deal can be organised.

With the collapse of two deals within a space of less than two years, it would be easy to sympathise with those who want to bring the episode to a conclusion. But a restructuring deal would, of course, be best for all the parties secured creditors, unsecured creditors and existing shareholders, though the return to the latter would be miniscule.

So what are the chances? It must be admitted that they are slim, but Power, up to now, has displayed a durability for staying around. The perceived advantages of doing a deal are unchanged by the collapse of the Beckwith deal. Although the shares have been suspended since last October, Power still has a share listing. It has tax losses of some £70 million. And it has a concentrated property portfolio.

Power must now be running out of time with the Stock Exchange. It has already breached the Stock Exchange rule which requires the issue of an annual report within six months of the end of a trading period. And it should be noted that the shares were suspended pending publication of that report.

The last results, received by Power's shareholders, were for the six months to the end of September 1994. These are now almost two years out of date.

The problem for Power is that it does not want to issue results without an accompanying deal. In that way it could point to the positive impact of a restructuring, rather than to an historic balance sheet showing a negative net worth. However, unless there is positive evidence that a new deal can be arranged quickly, the Stock Exchange will have little choice but to delist the company's shares.

The tax losses are a big incentive for any new investor. But such an investor would have to generate new profits, from a revamped group, to gain the benefits. Also, Mr Beckwith is understood to have had reservations about the benefits, following the expected £50 million write off by the unsecured banks.

The property portfolio has some interesting properties. The Irish properties consist of the Powerscourt Townhouse Centre in Dublin and three properties in Cork (Queens Old Castle, Savoy Shopping Centre and the Courthouse Chambers). In Britain, it has the Royal Exchange Shopping Centre in Manchester.

However, the bulk of its portfolio, around 85 per cent, is in the US. These consist of the San Francisco Shopping Centre, The Rhinelander Mansion, Madison Avenue, New York, 345/ 347 Rodeo Drive, Los Angeles, an interest in the Ambassador Hotel site in Los Angeles, and interests in 256 Worth Avenue, Palm Beach, Florida. But US retail property values have fallen sharply over the past year.

Power has only remained in existence because the banks have allowed it to tick away as it tried to organise a restructuring. As it has not paid interest, it is in a form of quasi receivership. Going further than that would be more expensive, but, in the absence of a deal, a conclusion would at least be reached fairly quickly.

As the syndicate, led by Irish Intercontinental Bank, ponders the next move, Power is standing on a fine balancing line. Considering the herculean efforts it has made to refloat the company, it deserves to succeed, but time is fast running out.