A day after the company lost a quarter of its stock market value, cash-strapped vehicle replacement firm Accident Exchange has issued an update on its refinancing negotiations and it looks like existing ordinary shareholders will see their stakes substantially diluted.The company said that negotiations with its senior lender, Morgan Stanley, about a restructuring of its existing £40m credit facility have not yet been concluded but agreement has been reached in principle to extend the repayment date on its senior facility until July 2013 on an amortising basis.Any formal amendment to the senior facility is, however, conditional upon the holders of the company's £50.0m 5.50% unsecured convertible notes due 2013 converting that debt into equity, and also the finalisation of the detailed terms of the amended senior facility, including agreement on appropriate covenants.Discussions regarding a restructuring of the convertible notes are also making progress, and holders of in excess of 94% by value of the notes have now expressed their support in principle for a complete conversion of the outstanding notes into ordinary shares on amended conversion terms to be agreed.Conversion of the notes to equity will reduce gearing and remove the annual cash interest payments of £2.75m.It is expected that such conversion will be on significantly amended terms to the current conversion price of 75.4p and that existing shareholders will be significantly diluted as a result of such subsequent conversion. A conversion of the loan notes would leave a relatively small proportion of the company's shares in the public's hands and it is probable that the company will cancel its stock exchange listing as a result, subject to shareholders' approval.The company continues to trade with the support of its senior lender and the board expects that support to remain in place such that shareholders can vote on the resolutions required to implement the overall refinancing even though the timetable for concluding it will extend beyond 30 September 2010.