Jarvis gets the jitters as debt talks continue

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The Independent Online

The struggling engineering group Jarvis saw its shares fall yesterday after reports that it needed to borrow another £20m to last until August when it hopes to carry out a debt-for-equity swap. The shares dropped 14 per cent to close at 9p.

The struggling engineering group Jarvis saw its shares fall yesterday after reports that it needed to borrow another £20m to last until August when it hopes to carry out a debt-for-equity swap. The shares dropped 14 per cent to close at 9p.

Jarvis said: "As announced on 29 March, the group is discussing with its lenders both its short-term working capital requirements and the longer-term objective of restructuring its funding and capital base."

There was speculation yesterday that the rail and road maintenance group faced a £20m shortfall related to one-off costs from asset sales. Jarvis turned to its lenders in March to borrow a further £17m in short-term financing and needs a balance sheet restructuring to rescue it from financial collapse. It wants to exchange some of its £280m debt for shares in the company to reduce the interest it has to pay. Jarvis's original creditor banks, including Barclays and Royal Bank of Scotland, have sold their debt to 11 US distressed-debt specialists, including Lonestar, Strategic Value Partners and Canyon Capital.

Jarvis has appointed the investment bank Rothschild to lead negotiations with its banks. It has also sought to cap its exposure to construction contracts related to private finance initiatives, which had been causing it to lose cash. It has made a refinancing deal with its banks that will extend their support to March 2006.

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