Jarvis to secure £20m lifeline but must find further £200m

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The Independent Online

Jarvis, the crisis-hit infrastructure business, is expected to take a small step away from financial meltdown this week with the sale of its French roads business for around £20m.

But the announcement will still leave Jarvis's new chief executive, Alan Lovell, with a mountain to climb. He has to raise nearly £200m through disposals in just 12 days to guarantee the company's survival.

The roads business, which makes products such as reflective paint, is expected to be first off the blocks. It is understood that the company is in advanced negotiations to sell the business that, unlike many of Jarvis's other assets, is relatively uncomplicated.

This, however, won't be enough to guarantee Jarvis's survival into the new year to meet Mr Lovell's self-imposed deadline to raise the cash or face having the plug pulled by its banks.

Jarvis has £250m of debts and its creditors, led by Barclays and Royal Bank of Scotland, have provided Jarvis with £25m of additional banking facilities and waived loan covenants.

To avoid collapse, Jarvis must sell off its one-third stake in Tubelines, one of the London Underground operators, and raise new cash on its Private Finance Initiative (PFI) schemes.

Jarvis is close to agreeing a £100m sale of its Tubelines investment to Star Capital, a £400m fund set up by Tony Mallin, a former Hambros banker. A deal is understood to be close, but it still requires the approval of Amey and Bechtel, the other members of the Tubelines consortium, as well as Transport for London.

Jarvis is also attempting to raise a further £100m to complete its 14 PFI projects, which will see it building fire stations, schools, hospitals and university accommodation. Jarvis is tapping its equity investors, such as Barclays Private Equity, as well as the companies that underwrote the deals for the money. However, Jarvis is facing in some opposition from a group of Canadian and US insurers that has hired Talbot Hughes McKillop, a restructuring advisor, to act for it.

Of the 14 PFI contracts, four will be handed over to Vinci, the French construction company. A further five contracts are expected to be sold to another, as yet unnamed, company.

However, because of the liabilities attached to the contracts, Jarvis is expected to pay the bidders to take over some of the projects.

Mr Lovell, who joined Jarvis in October from tennis-racquet maker Dunlop Slazenger, is unlikely to see much of his family over Christmas. As well as attempting to complete the disposals he will put the finishing touches to Jarvis's interim results, which must be published before 31 December.