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Costain must pay Hanson dollars 5m

COSTAIN, the construction group, has to pay Hanson dollars 5m (pounds 3.2m) compensation after its decision to sell its Australian coal mining business to a higher bidder.

The payment, disclosed in a circular to shareholders, is unconnected with the legal dispute between Costain and Peabody, Hanson's coal mining subsidiary, over the cancellation of the sale. It represents a termination fee and liquidated damages under the terms of the contract.

Costain had agreed to sell the mining business to Peabody for dollars 200m but subsequently agreed to sell the business, plus its Australian property interests, to Altus Finance for dollars 245m. Peabody is suing Costain in the US to force it to complete the deal, while Costain has asked the British courts to confirm its right to go ahead with the deal. Peter Costain, Costain's chief executive, said he was confident of winning the legal action.

The circular also disclosed that the pounds 56.1m debt relating to Spitalfields, the development site east of the City, had been taken on to its balance sheet. This means net borrowings have risen from pounds 240m at the end of June to pounds 340.4m at the end of October.

The change follows a refinancing of Spitalfields Holdings, the joint-venture company owned by Costain, BICC and London & Edinburgh Trust. Costain elected to refinance Spitalfields debt from its own borrowing facilities.

Costain's shares fell 1.5p to 22p.