BOREHAMWOOD, England - Henlys Group PLC, the British company that lays claim to being the largest manufacturer of buses and coaches in the U.S. and Canada, has been beaten to a pulp by the prolonged slump of the North American bus market and problems at its school bus manufacturing subsidiary.

In a series of rapid-fire developments, Henlys revealed in mid June that its shares are largely worthless and it's having them delisted on the London Stock Exchange. Additionally, it has named two turnaround specialists to its top executive positions, and it's working with its banks and other creditors to try to salvage the company. Whether it will succeed -- given its huge debt and continuing losses -- is problematic.

Henlys, which is headquartered in the London suburb of Borehamwood, Hertfordshire, owns 100 percent of Blue Bird Corp., the largest school bus maker in the U.S., and half of Prevost Car and its subsidiary, Nova Bus. Volvo Bus Corp. owns the other half of Prevost and Nova Bus.

"The board's aim is to achieve a restructuring which preserves the group's principal operating businesses in North America and offers significant prospects for an enhancement of operating performance, leading in turn to improvements in value in the longer term," Henlys said in a statement.

"Initial discussions with the lending banks have been constructive and the board anticipates this will lead to a positive outcome," the company added.

Announcements shock
Henlys' revelation last month that its shares have "little or no value" and would be delisted shocked the British financial markets and press. Although the company's problems were no secret, there apparently had been lingering hope on the part of some investors that things might turnaround.

Such thinking disappeared in a heart beat after the June news hit. Henlys shares, valued at around $2 (U.S.) at the beginning of February, fell to about 2 cents after the company said any restructuring would dilute shareholders' interest to virtually nothing.

Henlys' string of sobering statements included two announcements reporting that its board had replaced top management with executives experienced in corporate turnarounds, including David James, a 66-year-old executive who has spent most of the past 15 years shuffling from one corporate basket case to the next.

James was appointed chairman, while Timothy Redburn was named executive director. In announcing the hiring of Redburn, Henlys made a point to note he had "extensive corporate restructuring and turnaround experience" gained at four public companies.

The past 33 months have largely been a disaster for Henlys. The extended economic slump in the U.S., including severe cutbacks in bus purchases by school districts and municipalities; the aftermath of 9/11; the SARS outbreak in Canada; the collapse of a joint-venture British bus manufacturing company that was 30 percent owned by Henlys, and a whole range of problems at Blue Bird sent Henlys into a financial freefall.

Lots of red flags
The company's annual reports for recent years recount and reveal a deteriorating financial position. Or, in the words of one British financial journalist: "There were enough red flags to festoon a Communist Party conference."

Earnings and sales have been sliding since 2000; its ability to cover interest costs have become razor thin; it incurred "exceptional" charges year after year, and a loss was retained in each of the past three years.

On the company balance sheet, Henlys' tangible assets were dwarfed by intangible goodwill. Even with the intangibles, the company's net assets had dropped to $267 million by last September 30, when its net debt was $521.5 million.

Meanwhile, Henlys had to write off its $130 million investment in TransBus, the United Kingdom's leading bus builder, which was 30 percent owned by Henlys and 70 percent owned by The Mayflower Corporation PLC.

Mayflower went belly up at the end of March, and its administrators put the company, its businesses, its assets and certain of its subsidiaries on the block. TransBus owned three major British bus brands - body builders Alexander and Plaxton and chassis manufacturer Dennis.