Balfour Beatty believes Jarvis PFI contracts are too risky to take over

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The Independent Online

Balfour Beatty, one of the firms most heavily involved in the private finance initiative, does not plan to step into the breach should its rival contractor Jarvis collapse.

Although Balfour is a major player in the PFI market, specialising in big hospital and schools projects, it is understood to have decided not to take over any projects run by Jarvis should the company be forced under by its weight of debts.

Jarvis has some £4bn of PFI contracts, mainly in the education sector, and is responsible for maintaining nearly 100 schools up and down the country.

Balfour is thought to have decided that the PFI contracts signed by Jarvis are too risky to take on. It is, however, believed to be interested in the company's rail renewal work.

Jarvis has recently renewed three track-replacement contracts with Network Rail worth £300m over the next five years. Balfour is also a big player in rail renewal. It is thought that Balfour would be interested in taking over the contracts from Jarvis but not buying them should its rail division be put up for sale to pay down the group's £230m debts.

Meanwhile, Jarvis's two main bankers, Royal Bank of Scotland and Barclays, will tomorrow receive a report from the accountants Deloitte on the financial health of Jarvis. The report, which Jarvis commissioned to give comfort to its lenders, will help determine whether the two banks decide to allow it a further waiver of its banking convenants. Jarvis disclosed 10 days ago that it was in breach of the covenants but had been granted a waiver lasting until the end of July.

Jarvis is under pressure to announce a financial restructuring alongside its delayed 2003 results, which must be published before the end of the month.

The financial rescue is likely to involve asset sales and possibly a debt-for-equity swap.