MAPELEY, the offshore company that owns the Inland Revenue’s property portfolio, has warned shareholders it could go bust unless they vote in favour of a rescue convertible bond issue backed by Fortress, the American investment group.

In a circular sent to investors, Mapeley cautions that it does not have sufficient working capital to survive the next 12 months.

It also warns it may have insufficient cash to pay back a £60m corporate facility taken out with Deutsche Bank unless the bond issue gets the green light. The facility is due for repayment in April.

“If the transaction does not proceed . . . Mapeley Group may become insolvent or unable to continue trading,” the document says.

It goes on: “A default under the corporate facility would jeopardise Mapeley’s overall financial position to the detriment of shareholders. This is because the corporate facility has security over the whole of Mapeley Group’s assets, the enforcement of which would jeopardise the company’s ability to continue as a going concern and shareholders would potentially lose the entire value of their investment in the ordinary shares.”

Shareholders are due to vote on the convertible bond issue – which would raise £48m – on January 26.

Fortress, which owns a majority stake in Mapeley, is prohibited from voting, leaving the company’s fate in the hands of independent shareholders.

The bond issue – which has an eyewatering 20% coupon attached to it – will go ahead if a simple majority of shareholders vote in favour of the transaction.

Mapeley refused to comment on the risk to HM Revenue & Customs (HMRC) if Mapeley goes bust, other than to say the government had all the necessary protection under the terms of its contract. Mapeley is responsible for property and facilities management of the HMRC estate.

It is thought the Revenue’s assets are ringfenced in a Mapeley subsidiary and the cash flow from its rent payments covers interest payments on debt in the subsidiary.

A spokesman for HMRC would only say: “We have business continuity contingency plans in place to cover a wide variety of eventualities. These are continuously reviewed and updated.”

If the convertible bond issue goes ahead, Fortress is expected to increase its stake in Mapeley to more than 75% and delist the company from the stock exchange.

Mapeley’s financial difficulties are becoming an increasing source of embarrassment to the Revenue – which was lambasted by back-bench MPs and ridiculed in Private Eye for selling its assets to a company based in a tax haven.

Shares in the business have collapsed by more than 90% in the last year alone. They were floated at £23 in 2005. Last year Fortress tabled a failed £19-a-share bid to take the business private. On Friday the shares were valued at just 78Çp.

While critical of the deal, the National Audit Office said in 2004 the outsourcing deal would save the Revenue £344m over the 20-year lifetime of its contract with Mapeley. Now it is unclear – just eight years into the deal – whether Mapeley will even survive for a further 12 years.

Lord Oakeshott, Liberal Democrat Treasury spokesman, said this weekend: “HMRC let Mapeley take taxpayers to the cleaners by putting its property into a tax haven in 2001. Now Mapeley is in dire financial straits and doing a desperate rescue bond issue there must be a real danger taxpayers will lose out again. Mapeley is meant to manage most of HMRC’s leasehold offices and provide full facilities-management services. But if Mapeley goes bust, is the taxpayer properly protected?”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax