Shares of Carillion Rise on Hopes of Bank Support

Photo by Terry Robinson via Wikimedia Commons

This morning, shares of Carillion rose more than 12 percent in early trades as hopes grew that banking support can be ensured at a critical meeting that is scheduled on Wednesday.

Late on Saturday, the company said that it would present a business plan to lenders this week.

Carillion is expecting to plug a mammoth funding gap, and it believes that the meeting will provide a springboard to turn the company’s fortunes around.

Over 90 percent of the stock market valuation of the firm was wiped out in 2017 following a series of profit warnings and contract write-downs amounting to over £1bn.

In September, the company were able to convince lenders, led by Barclays, HSBC, and the Royal Bank of Scotland to offer Carillion emergency funding amounting to £140m and in November, it announced that it would defer the testing of its banking covenants.

However, £40m of the new money is scheduled to be paid back in April, with the remainder to set to fall due by the end of 2018.

In the wake of troubles that was first announced in July, Carillion pinned its hopes on decreasing a debt pile amounting to £1bn by raising £300m from selling its non-core assets. The majority of the money was expected to come from the sale of Canadian subsidiaries, which the company has not been able to sell so far.

Last week, the Financial Conduct Authority (FCA) announced that it was starting a probe into Carillion regarding its stock market communications in the months before a shock announcement was made in July.

The investigation followed a report exposing the depth of the problems that are experienced at the company and how hedge funds were apparently aware of them well in advance of the previous summer.