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Vasanta Group in talks to save 1,400 jobs as it teeters on brink of collapse

Sunday 5 July 2009

PricewaterhouseCoopers (PwC) has been lined up to act as administrator to Vasanta Group, which has been hit by the withdrawal of credit insurance to key suppliers.
The company could collapse as soon as this week unless it can secure new funding, according to people close to the situation.
An emergency board meeting is being held today to discuss the crisis, and prospective investors including Alchemy Partners, the private equity group, have been approached about putting together a rescue deal.
If Vasanta is forced to call in administrators, it could prove embarrassing to the Government on two fronts.
The lead lender to the office supplies group is Royal Bank of Scotland (RBS), which is 70pc-owned by the taxpayer.
The failure of the Government\'s credit insurance guarantee scheme to protect Vasanta is also likely to be referred to by critics of the programme, which was hailed by ministers as offering a crucial cushion for companies hit by a wholesale reduction in cover in recent months.
Vasanta is owned by Electra Partners, a private equity firm, which wrote off its £40m investment in the company earlier this year.
Electra is understood to have proposed a deal that would see it injecting more capital into Vasanta. This was rejected by the company\'s lenders, which also include Bank of Ireland and four other parties.
It is likely that the management of the Sheffield-based firm, including its chief executive, Richard Martin, will lose its entire £8m investment in the event of a collapse.
Mr Martin led a buy-out of Vasanta, formerly called Kingfield Heath, in 2007, which then merged with computing supply companies ISA and Supplies.
The supply group, one of the 100 biggest private companies in the country, made annual profits of £30m on revenues of £523m in 2007 supplying workplace essentials from stationery to furniture.
Electra Partners, which is listed on the London Stock Exchange, saw the value of its investments fall by £76m for the half-year to the end of March, resulting in a loss before tax of £106m. It admitted in May that it had written down the value of Vasanta by 95pc to £28m over that period.
\"In the case of Vasanta, the removal of credit insurance led to a significant increase in the company\'s debt levels with a corresponding decrease in the equity value of the investment,\" the board said.

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