Pressure eases on Abbeycrest after £2m funding move

The Leeds-based group, which breached covenants with its senior lender last month, said its subsidiary Abbeycrest Thailand has negotiated an increase of 2.1m to its seasonal working capital facilities with its long standing finance provider, Siam Commercial Bank.

The extended facilities include an increase of 1.9m to its invoice financing with trade clients and an additional 200,000 to buy gold.

The extended facilities, which now total 5.8m, will cover the expected peak working capital requirements of the August to December period and are renewable annually.

Abbeycrest breached profitability covenants in July after the high price of gold dented demand, margins and working capital. It warned in June that covenant breaches were likely and in July it confirmed the breaches with its senior lender, Burdale Financial, a subsidiary of Bank of Ireland.

Abbeycrest has been in talks with its other lender, Siam Commercial Bank, over extending its facilities for some time.

Abbeycrest, led by chairman Simon Ashton, has been hammered by the surging price of gold over the past year, caused by the flight to safety among investors.

The gold price increased by 25 per cent in the year to the end of February, giving an average price of 636 an ounce.

Gold struck record highs in late June, around the time of Abbeycrest's covenant test, on worries the debt crisis in Europe would spread, plus fears over the slowing US economy.

Abbeycrest said gold hit 835 an ounce on June 17. As well as stifling consumer demand for gold, the high price has also piled pressure on Abbeycrest's working capital needs.

Prior to yesterday's announcement, Abbeycrest had warned it must either refinance or cut 600,000 from its working capital needs in September, usually a time when peak funding is needed. Abbeycrest had net debts of 5.6m at the end of February.

Despite the problems, Abbeycrest says it is "now in a much better position to capitalise on opportunities in the global jewellery market".

Its "strategic withdrawal from lower margin activities" last year helped it record a pre-tax profit, before exceptional items, of 55,000, compared with a 1m loss the year before.