Shares in the indebted engineering group Jarvis fell by almost a fifth yesterday after the company revealed that it had been forced to return to its banks to borrow a further £17m.
It insisted the extra cash was solely a working capital issue, though declined to comment on how it had arisen - whether it was because Jarvis was owed money by others or whether its expenses had increased.
Alan Lovell, the chief executive, said: "We always said [cash] was going to be tight. This [new borrowing] is due to timing issues only ... It is no great shakes."
Mr Lovell said the money was only needed in the short term while Jarvis worked on a financial restructuring that would "very likely" involve a debt-for-equity swap. The City has estimated the company's debt at £280m.
Mike Foster, an analyst at KBC Peel Hunt, said: "The important point is the ongoing support of the banks and the robust cost-cutting allied to healthy operating profits in the continuing divisions looking forward."
Michael Donnelly of Bridgewell Securities was not so generous: "Is Jarvis going to be a big recovery story? Is it worth the risk? Probably not. If you've got [money] and you want to put it in this sector there's plenty of places you could put it at lower risk and better risk than this."
Jarvis said the new money would "add an effective one per cent per month payment in kind [non cash]" - that is, it would not cost more in cash interest payments. The banks would instead extract an additional price when it comes to the restructuring talks.
Mr Lovell said the debt-for-equity swap may only be an "element" of the company's finan- cial restructuring, which he hopes to complete by the end of the summer.
"One thing we would probably contemplate is a heavy rights issue [involving the lenders]. I've talked previously about a new strategic investor coming in and picking up some part of the equity and some of our existing shareholders expressed some interest," he said.
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