The infrastructure services group, Jarvis is again in the red as it has announced yet another restructuring program that would entail borrowing of some more money, leading to a debt-for equity swap and new equity financing.
As the already overdrawn group confessed that it was in need of cash, despite borrowing £17 million as emergency loan recently in March, shares at the Jarvis group plummeted to their all-time low levels, by 36% to 7p.
Jarvis is known to have professed that it was soliciting the Deutsche Bank to provide it with finance of £31.4 million. Shrouding the true reasons in diplomatic phrases, Jarvis said that the extra loan was essential to fulfil “immediate and short-term funding requirements”.
The company’s admission yesterday, to its new loan comes across in stark contrast to what the chief executive of Jarvis, Alan Lovell, stated while taking the March loan. He had staunchly termed the refinancing move as a unique, or once in a lifetime move that would never be repeated. It is another matter though that even the March financing caused shares at Jarvis drop drastically, since the proclamation came hardly a couple of months after the faltering group approved of a corporate bailout by the Royal Bank of Scotland and Barclays.
Meanwhile, Jarvis informed that a big restructuring program was underway and the new loan was just a part of that strategy. He mentioned that the program could comprise of a debt-for-equity swap as well as a new equity financing, which was definitely not very good news for shareholders.
Furthermore, Jarvis clarified that the details of the debt-for-equity conversion were still in progress, though it was highly probable that the present shareholders of the company would be left with “5pc or less of the equity value of the group following the conversion, depending on the structure that is implemented.”
The company added that another ‘£50 million equity raising’ would take place subsequently. Jarvis said, “The combination of a debt-for-equity conversion and the equity raising will strengthen the group’s balance sheet and reduce the group’s debt to a low level.”
A spokesperson of the company notified that the refinancing would be approved of in a few weeks, although as many as 70 per cent of creditors had given their consent to the restructuring program.
Posted
on : Wed, 25 May 2005 13:30 GMT | Loans News
By : Mike Lawson
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