Mirror resignations create new shock waves

Newspapers. That was after the revelation that there had been material

sums transferred from the newspaper company to the private Maxwell

interests.

The City had thought earlier in the day that the resignations of Kevin

and Ian from the board of Maxwell Communication Corporation was surprise

enough given the suspension of the shares of both MCC and MGN on Monday.

There had been rumours and rumblings of there being something far

adrift over the last few weeks including action being taken by some

representatives of MGN pensioners against the trustees of the pension

fund. There have been allegations of improper lending to private Maxwell

interests. These include a large amount of cash to MCC and other

investments, including some in Canada, altogether amounting to about

#30m, or 10%, of the MGN pension funds.

But after last night's sensational disclosure it seems inevitable that

MGN will be sold. That could take the form of either the straightforward

public offer for sale or else direct to a specific buyer. Over the last

few days there have been various suggestions but the most likely buyer

is Australian entrepreneur Kerry Packer.

Last weekend he dropped out of the bidding for the Fairfax newspaper

publishing group in Australia. It was thought he withdrew because it was

becoming increasingly obvious that the Mirror Group could soon be up for

sale.

Yesterday morning Kevin Maxwell said that the public part of the group

had lent money to the private part. At the same time he said his

resignation had nothing to do with the problems in the pension funds,

including that of the privately-owned AGB International market research

group. He refused to say whether the family-owned 51% stake in MGN was

up for sale or the 68% holding in MCC.

In a complete volte face last night, he totally contradicted his

earlier statement about his and his brother's resignations.

It was very surprising that Ian did not stand down from MGN at the

same time as Kevin resigned from MCC. But there always had been a

suspicion that MGN had not been fully ''ring-fenced'' within the Maxwell

empire despite the protestations and verbal guarantees given by the late

Robert Maxwell at the time of the MGN flotation. In the past the

suspicion had been that there was a liberal and secretive flow of funds

and assets within the Maxwell organisation.

Robert Maxwell was at times not over-careful about the niceties of

company law as borne out by the highly-critical Department of Trade

investigation into the affairs of Pergammon Press in the early

seventies.

Since the flotation of MGN this summer there has not been a financial

report or results submitted to the Stock Exchange, so it is difficult to

assess whether or not there has been a drain of funds from MGN

elsewhere. However, MGN pensioners have been taking action against the

trustees of the pension fund alleging inappropriate investments.

The private debts of the Maxwell family are now understood to exceed

#1000m. In addition, MCC, which is changing its name to Macmillan, the

name of its major asset in the form of the US publishing house, has

debts of between #1100m and #1400m.

Kevin Maxwell, in a prepared statement, said that it was in the best

interests of the company's shareholders and employees that he and Ian

step down with immediate effect from MCC.

The 30 banks, where the five-member steering committee is led by

National Westminster's John Melbourn, had agreed to maintain their

standstill position on loans until Friday to allow the Maxwells to come

up with an acceptable solution to the debt problem. But obviously there

must be considerable confusion this morning as to what will happen next.

Almost certainly some banks which had originally agreed to a

standstill on loan repayments until December 20 may well want to press

their own claims, particularly if they are not substantial in the

overall context.