The Glitnir Bank and seafood specialists say that the group has agreed to submit a motion to shareholders at the annual meeting later this month to authorize the company to take out subordinated debt of around €41 million, with a four year maturity at a fixed annual rate of 23 per cent.

The aim of the loan is to reduce the proportion of short term financing in Icelandic's total funding. Meantime, the group has agreed to withdraw a proposal to increase the share capital by €30 million, announced when the annual results were published last month.

This move, says Glitnir, "indicates that the Icelandic Group is now fighting for survival". The bank, which has repeatedly warned about Icelandic's debt problems, adds: "The company's performance has been unacceptable recently and its debts are high."

If this analysis turns out to be correct, then things do not bode well for a group that employs well over 1,500 seafood workers in the Grimsby area alone.

Icelandic owns Coldwater Seafoods and Seachill on the Humber, both supplying key retailers like Marks & Spencer, Tesco and the Icelandic Group with a wide range of fish and value added seafood products. It also has key contracts with a number of Scottish langoustine skippers who supply shellfish to the Humber factories for Marks & Spencer stores nationwide. Operations at the company's other Coldwater factory at Redditch in the Midlands are under review, but the outlook cannot be good.

Icelandic also has key production sites in Europe (France, Germany and Spain), the United States and in Japan and other parts of Asia, some of them operating at a big loss.

Just three weeks ago, Icelandic announced its results for 2007 and they did not make for cheerful reading. Sales were fell by over five per cent, but even more worrying they were down by 8.5 per cent in the final quarters (September to December). Operating losses for this period were also accelerating and there have been a number of boardroom changes in recent months.

Group chief executive, Finnbogi Baldvinsson admitted last month it had been a difficult year, but indicated there was light at the end of the tunnel and profits should be back next year.

He said Icelandic had sent a strong message to the market by its decision to increase the share capital by €30 million - but this move has now been dropped for a short term loan, which Glitnir indicates is very worrying.

More drastic restructuring, which inevitably means job losses, may not be that far off.

www.fishupdate.com is published by Special Publications. Special Publications also publish FISHupdate magazine, Fish Farmer, the Fish Industry Yearbook, the Scottish Seafood Processors Federation Diary, the Fish Farmer Handbook and a range of wallplanners.

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