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UPDATE 2-Battered Carillion drafts in HSBC amid rights issue talk
July 14, 2017 / 8:05 AM / 5 months ago

UPDATE 2-Battered Carillion drafts in HSBC amid rights issue talk

* HSBC brought on board at end of dramatic week

* Move fuels talk of emergency rights issue

* Battered Carillion shares bounce (Adds details on HSBC)

By Esha Vaish

July 14 (Reuters) - Crisis-hit Carillion added HSBC to its team of financial advisers on Friday, fuelling speculation that the construction and support services company was preparing a rights issue after a tumultuous week.

Carillion, which had seen 70 percent wiped off its market value over the past four days, is reviewing “all options” after it booked a 845 million pound ($1.1 billion) writedown against customer payments it no longer expected to be able to collect.

Analysts believe Carillion might have to raise at least 500 million pounds via a share sale or that a debt-for-equity swap could be on the cards to shore up the balance sheet.

Its average net borrowing in the first half of the year rose to 695 million pounds from 586.5 million over 2016.

Shares bounced 5.7 percent to 58.6 pence by 1330 GMT, valuing the company at only about 250 million pounds.

Carillion shares have been in freefall following the profit warning and exit of its chief executive at the start of the week. Its bondholders have braced for “painful” talks as a pile-up of receivables and debt spooked investors.

The news has caused a number of analysts to cut their rating on Carillion. The HSBC research team has not issued any target price or recommendation on the stock in the last 12 months.

HSBC, which has been part of Carillion’s banking group in the past, joins Morgan Stanley and Stifel as Carillion’s existing corporate brokers and Lazard as its financial adviser.

A source said HSBC would complement Carillion’s existing advisor line up.

“With (HSBC) having a long-standing relationship with Carillion, they’re quite supportive at this time, ” the source said.

Carillion was demerged from the Tarmac group in 1999 and went on to buy construction firm Alfred McAlpine. The company has worked on projects ranging from London’s Tate Modern gallery to the Twickenham rugby stadium.

HSBC was Carillion’s joint bookrunner on its bond placing in 2014 and also adviser on its failed attempt to take over peer Balfour Beatty. The deal would have been Carillion’s largest ever if it had been successful.

HSBC was bookrunner on rights issues across Europe, Middle East and Africa which raised $1.78 billion in the first six months of the year, according to Thomson Reuters data.

This helped its market share rise by 3.4 percent, bumping up its ranking to eighth from 24 last year.

The bank, which re-launched its corporate broking in January 2013, has since been targetting more mandates. A spokeswoman for HSBC declined to comment when contacted by Reuters. ($1 = 0.7716 pounds) (Reporting by Esha Vaish in Bengaluru; editing by Jason Neely/Keith Weir)

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