Broker has BT on hold for £22m

BRITISH Telecom is set for a showdown with money broker Prebon Yamane next month when the telecommunications giant demands the repayment of loan notes worth £22m.

The battle could lead to a credit crisis for Prebon Yamane, which lost £913,000 in the year to March, 2003, and baldly stated in a recent filing at Companies House that it 'does not anticipate' either repaying the loan or paying interest on it this year.

The showdown comes at a difficult time for Prebon Yamane, which is seeking to raise funds by selling a minority stake. Takeover talks with broker Collins Stewart Tullett broke down last year after the two sides failed to agree on a price.

BT holds 30% of loan notes that were issued by Prebon Yamane to fund the acquisition of rival Marshalls in 1999. The remaining notes are held by former employees of Marshalls.

The loan matures on 31 March, and it is understood that BT is determined that they should be repaid. Prebon Yamane claims that it does not have to repay the loan notes if, as a result, the company becomes insolvent.

Prebon's general counsel, Geoff Mayhill, said: 'The original terms of the loan notes said that they would be repaid in three parts from 2002 onwards, and that has obviously not happened.

'We helped rescue Marshalls, but we said that we would only do that if it did not hurt Prebon.

'We just don't have £22m in cash sitting on the balance sheet and in such circumstances we are not obliged to make the payment.'

However, British Telecom is unsympathetic to Prebon's situation. One insider said: 'The company has a significant annual turnover. By that measure it is profitable, so we would expect to be repaid.'

Mayhill said: 'We know that British Telecom would like to receive money, but it is not entitled to it. We have an ongoing dialogue with them.'

It is believed that Prebon Yamane held talks with private equity firms, including Bridgepoint Capital, regarding refinancing, but that no money has so far materialised.

Despite the loss suffered by the money broker, it paid one director - thought to be Arthur Hughes -2.2m in the year to March 2003, up from £834,000 a year earlier.