Infrastructure firm Mouchel was pulled back from the brink today as a syndicate of banks agreed to wipe out a chunk of the ailing firm's debt in a last-minute deal.
Mouchel, which provides consulting and business services on road building and other public sector projects, warned it will collapse under its £140 million debt pile at the end of this month if shareholders do not approve the debt-for-equity swap.
Royal Bank of Scotland, Lloyds and Barclays will release £87 million of debt in exchange for a controlling stake in the business, safeguarding 8,000 jobs and leaving Mouchel with a more sustainable £60 million-worth of debt.
The group, which has been hit by Government spending cuts, has been behind major building projects more than a century after Frenchman Louis Gustave Mouchel brought the patent for reinforced concrete to the UK in 1897.
Mouchel's woes were compounded last year when Richard Cuthbert resigned as chief executive after the company revealed a £4.3 million accounting error.
Chief executive Grant Rumbles said the restructuring represented the "best possible outcome" for stakeholders, as well as safeguarding existing customer and supplier contracts and preserving job security.
The group last year turned down takeover offers from rivals Costain and Interserve for more than £150 million, saying they significantly undervalued the company.
But since then its fortunes have dramatically declined. Its shares are now worth just 1.7p, giving the company a market value of £2 million, compared with two years ago when they were trading at 120p.
The company slumped to an £11.6 million loss in the six months to the end of January.
The new deal will ultimately see Mouchel shares delisted on September 25 after payment of a 1p special dividend to shareholders. The agreement is subject to the approval of investors at a general meeting on August 24.
Andy Brown, analyst at Panmure Gordon, said: "While this is a poor outcome for shareholders it should ensure that existing contracts are delivered and employment of around 8,000 people is maintained."
The management team has carried out a strategic review, which will see it make £21 million of cost savings - most of which are expected to have been implemented by September.
It is understood that these mainly relate to "systems and processes" and will not necessarily involve significant staff cutbacks.