Kier has announced that it is to undertake a £264m rights issue in a bid to pay down debt amid concerns that credit from lenders may be harder to come by.
The company made the announcement to the City today.
It said: “Although the majority of the group’s banking facilities are committed until 2022, a number of lenders have indicated an intention to reduce their exposure to the construction and related sectors, which may affect the confidence of other credit providers and liquidity in the medium term and may also have an impact on access to uncommitted facilities and/or future financings.”
Kier added that there was also increasing pressure to shorten the amount of time it took to pay its supply chain, while potential clients were paying increased attention to contractors’ balance sheets, making the procurement process more rigorous and automated.
It said the rights issue would allow it to “mitigate these risks” and accelerate its debt reduction programme, as well as increasing the strength of its balance sheet.
“The directors believe that it is important that the net proceeds of the Rights Issue are reported on the group’s balance sheet as at 31 December 2018, in order to enable the Group to be better positioned, in light of tighter credit markets and more stringent tender pre-qualification requirements, to win new business,” the company added.
Kier’s net debt as of 31 October 2018 was £624m.
Chief executive Hayden Mursell said: "There has been a recent change in sentiment from the credit markets towards the UK construction sector, with various lenders indicating that they will be reducing their exposure to the sector. This has led to lower confidence among other stakeholders and an increased focus on balance sheet strength. The rights issue is intended to address these issues, better position Kier to continue to win new business and further strengthen our market leading positions."
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This all seems reminiscent of the Balfour Beatty issue a few years ago, when coincidentally Mr Mursell and a few other current Kier Directors were on the Balfour Beatty Board.
Is this what happens when ‘accountants’ , who are probably too clever for their own good take the steering wheel from the prudent and conservative construction professionals who were previously in control??
What a true statement from Barry Mallott 3rd.Dec.
This company can’t be allowed to go to the wall if it does it will be the biggest construction incompetence ever.
As with all const.companies great people are employed by these companies.
We can’t see the great name of KIER being put in the DUST BIN.