Crisis-hit construction giant Carillion has brought in HSBC as an adviser as it scrambles to recover after almost £600million was wiped off its stock market value this week.
The move has fuelled speculation that Carillion is preparing a rights issue with analysts believing that the company might have to raise at least £500m through a share sale or debt-for-equity swap.
The firm, which is contracted to build a number of hospitals and revamp Liverpool football club’s Anfield stadium, announced today that HSBC has been appointed joint financial adviser and corporate broker with immediate effect to work alongside Morgan Stanley, Lazard and Stifel.
Seeking support: Crisis-hit construction giant Carillion has brought in HSBC as an adviser as it scrambles to recover after almost £600million was wiped off its stock market value this week
Carillion, which also has a contract to help run BT’s Openreach service, is carrying out a ‘comprehensive review’, announced earlier this week alongside a profit warning that saw £587m wiped off its value.
However, today’s announcement boosted the company’s share price by more than five per cent to 58.5p, but still a far cry from the 191p it was trading at last week.
Carillion’s market capitalisation has gone into freefall, falling from £826m to around £240m in a matter of days after it warning over earnings and on Monday it revealed an £845m write-off on construction contracts.
Just under half of the writedown stems from problems on public-private partnership contracts in the UK.
Chief executive Richard Howson also stepped down with immediate effect on Monday as the group said it would need to bolster its balance sheet and was struggling to stay within its borrowing limits.
He was replaced by interim boss Keith Cochrane while the company searches for a permanent boss.
High-profile departure: Chief executive Richard Howson stepped down on Monday as the group said it would need to bolster its balance sheet and was struggling with borrowing limits
Meanwhile hedge funds, which have shorted the firm’s stock, could be sitting on a £145m profit.
Analysts at UBS warned on Tuesday that shares could even plummet to zero if Carillion’s support services trading is hit, while other experts raised worries the group may not have the funds to restructure.
The same day, Carillion announced the suspension of its dividend to save £80m.
The company’s net borrowing rose to £695m in the first half of the year, up from £586.5m over 2016.
HSBC was Carillion’s adviser in its failed attempt to take over rival Balfour Beatty in 2014.
Carillion was demerged from the Tarmac group in 1999 and went on to buy construction firm Alfred McAlpine.