October 24, 2017 / 6:44 AM / a year ago

UPDATE 2-Debt-laden Carillion secures new funding, shares jump

* Agrees to new credit facilities totalling 140 mln stg

* Defers some pension contributions, note due in Nov and in Sept 2018

* In talks to sell large part of UK healthcare unit to Serco

* Shares climb as much as 25 pct (Adds analyst comments, details, background, share movement)

By Esha Vaish

Oct 24 (Reuters) - Carillion, which has issued two profit warnings this year, agreed to new credit facilities and deferrals on some debt repayments on Tuesday, sending shares in the troubled construction and services group up as much as 25 percent.

The small cap company has seen two-thirds of its stock value eroded since July, when it booked an 845 million pound writedown on problematic construction contracts, triggering a massive profit warning and the departure of its CEO. That was followed by a second profit warning in September.

On Tuesday, Carillion said it had negotiated two loan facilities totalling 140 million pounds ($185 million) and deferrals on certain pension contributions and on the repayment of private placement notes due in November and September 2018.

Together these would improve Carillion’s undrawn credit in 2018 by between 179 million pounds and 190 million pounds in 2018.

Interim CEO Keith Cochrane said that “much” remained to be done.

“We remain focused on executing our disposals and cost savings programmes while continuing our discussions with our lenders and other stakeholders to explore further ways of strengthening Carillion’s balance sheet,” he said.

Liberum analyst Tom Musson forecast that Carillion’s debts including provisions, pensions and accounts payable stand at about 1.5 billion pounds and he saw the company having a group enterprise value of 1.1 billion pounds.

Applied Value Ltd analyst Stephen Rawlinson said the “right value” for Carillion’s share price was between 0 and 150 pence.

Carillion’s shares were up 10.9 percent at 48.5 pence at 0944 GMT after trading as high as 54.5p.


Carillion is not the only construction and support services group to come under pressure in recent months.

Interserve, Mitie and Capita have issued warnings in the last 12 months, as rising labour costs have made contracts more expensive to deliver than budgeted for. A slowdown in contract awards due to Brexit uncertainty has compounded their woes.

Last month, Carillion warned on profit for the second time. It said then that it had decided to exit its UK healthcare and Canadian businesses to help it raise over 300 million pounds by the end of 2018 through disposals.

The company, which recently won construction work for Britain’s new high speed rail link and services work on domestic military sites, said on Tuesday it and its joint ventures had in recent weeks won three contracts worth 376 million pounds.

It added that it was in exclusive talks to sell a large part of its UK healthcare unit to rival Serco for 50.1 million pounds, and that it was evaluating whether to retain certain parts of its Canadian businesses.

“The important (news) is that Carillion is able to work through its issues, albeit slowly,” Applied Value’s Rawlinson wrote.

$1 = 0.7571 pounds Reporting by Esha Vaish in Bengaluru; editing by David Holmes and Jason Neely

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