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New Star, John Duffield's asset management group, is fighting for its survival after entering urgent negotiations with its bankers.
Shares in the fund management group, floated at 225p three years ago, collapsed 70% to 4.4p after the UK Listing Authority refused Duffield's request to suspend the shares.
While the company has been pummelled by falling global stockmarkets it is also debt-laden. It has £230m of debt after borrowing £300m in the spring of 2007 to return cash to shareholders when Duffield received £45m - four times more than the company's current market valuation.
In an announcement to the stock exchange this morning, the company said: "New Star announces that it is in advanced and constructive discussions with its bank syndicate. Pending the outcome of these discussions, New Star has requested a temporary suspension of its ordinary shares. A further announcement will be made as soon as possible".
But when the request to the UKLA - which is run by the Financial Services Authority - was denied, the company was forced to issue another statement which said: "Further to the earlier announcement today, the UKLA has denied New Star's request for a suspension of trading in its ordinary shares. Discussions with our bank syndicate are continuing and a further announcement will be made when the outcome of these discussions is known."
A number of companies listed on the stock market are currently in discussions with the bankers, including a string of housebuilders which are all trying to repair their balance sheets.
New Star signalled its problems last week when it stopped investors leaving its International Property Fund. Chief investment officer Stephen Whittaker has also left while the group tries to repair its investment performance.
A possibility for New Star is to sell out to a rival such as Aberdeen Asset Management or to Resolution, the soon to be floated acquisition vehicle run by insurance expert Clive Cowdery.
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