A £5.2 million rights issue at a fraction of the last traded price, wholesale changes in management and the replacement of the group's lawyers, stockbrokers and financial advisers form part of a massive restructuring of Mackie International by new chief executive, Mr Sul Sahota.

As was indicated by the company last April, the 1996 accounts have undergone a wholesale restatement, with the result that the reported £400,000 sterling loss has leapt to a loss of £7.2 million while the previously reported 1996 sales of £17.7 million have been restated to £12.6 million.

Mackie has also launched a rights issue which, Mr Sahota has warned shareholders, must be approved if the group is to have access to new £4.5 million banking facilities agreed with Ulster Bank. Mackie's existing bank facilities are insufficient to meet its commitments to creditors and the clear message is that this restructuring must be approved if Mackie is not to collapse.

But as well as the financial restructuring, Mr Sahota has carried out a massive restructuring of management, which resulted in the resignation of Mackie chairman, Mr Pat Dougan, and finance director, Mr Sean Harte, last Thursday.

Mr Sahota has also brought in the giant London legal firm Slaughter & May as company lawyers, replaced London stockbrokers Teather & Greenwood with Butterfield Securities and replaced financial advisers English Trust Company with Bank of Butterfield. The only survivor among Mackie's advisers is Dublin stockbroker, NCB, which is handling the rights issue with Butterfield Securities.

Commenting on the resignation of Mr Dougan and Mr Harte, Mr Sahota said that both had resigned "without prejudice to their employment contracts" and that discussions on the terms of their departure will take place with the remuneration committee of the new Mackie board.

Mr Dougan, however, is not totally severing his links with Mackie and, although not taking up his rights to new shayes has agreed to underwrite £1 million of the £5.2 million being raised in the fund-raising.

"He's a significant shareholder and without his support it would not be possible to do the financial restructuring," Mr Sahota said of Mr Dougan's partial underwriting of the rights issue. Mr Sahota himself is underwriting £300,000 while the rest of the issue has been underwritten by institutions. "If I didn't put up my money, it would be hard to give a valid argument to the institutions," he said.

Existing shareholders who do not take up their rights will face a massive dilution of their holdings as the rights issue is on the basis of five new shares for every two shares held at a price of 20p each. This compares with the 113p at which the shares were suspended two months ago and the 380p the shares reached at their peak 18 months ago.

But Mr Sahota was quite clear about the need for the rights issue and warned that the group would not get access to bank facilities if new equity was not forthcoming.

He added that 35 per cent of existing shareholders had given irrevocable acceptances to take up their rights.

On the restatement of the 1996 results, Mr Sahota said: "I've gone through the 1996 accounts and balance sheet and placed the accounting presentation on a prudent basis." The main changes in the accounts are the treatment of stocks, debtors and creditors and the valuation put on second-hand machinery bought by Mackie.

A £3.8 million provision has been put against stocks, £1.7 million on the valuation of machinery bought from customers, £1.2 million against creditors where repayment of debts is considered unlikely and £1 million against the group's investment in the Belgian company, Uniwear.

After the £7.2 million loss last yea, a loss of £4 million is expected in the current half-year before cost savings - particularly 60 redundancies from the 380-strong workforce - begin the process of recovery.

On the treatment of stocks, Mr Sahota said that some stock had been built and held but customers had still been invoiced. "It would have been more prudent not to have put these into the 1996 figures," he said. Mackie received part-payment in respect of these two contracts which were for a total of £6.8 million. Mackie is now to receive a total of £3.5 million.

A third contract related to the purchase of second-hand equipment, which was included in the balance sheet at its full purchase) price. The value of this equipment has been reassessed and has now been written down to nil value, resulting in the £1.7 million provision.

The alliance with Uniwear has resulted in a write-off of £1 million after Mackie opted not to proceed with the intended strategic alliance. One of the Uniwear shareholders has agreed to purchase 44 per cent of Mackie's holding in Uniwear and to seek purchasers for the balance.

If the financial restructuring is completed, and the required equity and debt finance is put in place, Mr Sahota believes that Mackie has a profitable future although a return to profit is unlikely until 1998.

"Underneath there is a very good business; it has gone through a very difficult patch because of destocking in the textile industry, but there is good potential in most of the sectors. The story is not a disaster; there are quite a few highlights."