Shares in Erinaceous, the troubled property services group, today plunged by nearly 32 per cent to a new low after its new management proposed a debt-for-equity swap to save the business from administration.

Erinaceous' stock fell 31.58 per cent to 9.75p in early trading, wiping £4.8 million off the company’s market capitalisation to value the business at just £10.4 million.

The company is struggling under £215 million worth of borrowings and the new management is in talks with its banks, HBoS, HSBC and Lloyds TSB, to reduce the sum which includes undertaking a possible debt-for-equity swap. Such a deal would result in its lenders effectively taking control of the business.

In September, Erinaceous was forced to renegotiate with its banks who increased the company's interest repayments to 10 per cent after raising the borrowing costs from 1.25 per cent over libor to 3.75 per cent.

Earlier this month, the two founders of Erinaceous, Neil Bellis, deputy chairman, and Lucy Cummings, Erinaceous's chief operating officer, both quit the business.

It is understood the two are still in talks with the new management about securing their payoff, which will reach a combined £730,000.

Erinaceous said today: "Due to the rapid expansion of the business under the previous management team, the group has an unsustainable level of borrowings.

"As a matter of priority, the board is working with its bankers to identify ways to reduce the group's debt which may include a debt-for-equity swap."

The company also announced today that Nigel Turnbull will step back step from the day-to-day running of Erinaceous to become non-executive chairman.

The company is now being led by Tim Redburn, a company turnaround specialist, and Dominic Lavelle, the new finance director. They are being advised by Close Brothers and KPMG.

Mr Turnbull, who has been with Erinaceous since 2002, was chairman of the Turnbull Committee that drew up guidance for listed company directors on internal controls.

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