Kier shares plunge on news of rights issue to tackle £624m debt mountain

Shares in UK builder Kier plummeted Friday after it said it would try and raise £264m through a rights issue in a bid to reduce its debt mountain of £624m.

The board is concerned over the availability of future credit, saying lenders are planning to reduce their exposure to the construction sector, which may impair the company’s access to financing.

In its announcement to the City on 30 November Kier said clients, too, are looking harder at contractors’ balance sheets, leading to "more stringent tender pre-qualification requirements, to win new business".

It faces another burden as pressure mounts to cut the time subcontractors have to wait to be paid.

Kier’s share price plunged 28% on the news Friday, from 700.5p to 505.5p, and shares were trading at 477p midday today.

Chief executive Hayden Mursell said: "There has been a recent change in sentiment from the credit markets towards the UK construction sector, with various lenders indicating that they will be reducing their exposure to the sector.

"This has led to lower confidence among other stakeholders and an increased focus on balance sheet strength. The rights issue is intended to address these issues, better position Kier to continue to win new business and further strengthen our market leading positions."

The plight of Kier, which grew its revenues to £4.5bn in the past year, prompted comparisons with Carillion, which was forced to shut down in January after banks and the government refused to lend it any more money.

It emerged in September that the same short-selling hedge funds that took aim at Carillion were targeting Kier, holding 10.9% of its shares as of 30 August.

That proportion has since risen to 14%, reports City A.M.

Image: Kier launched an apprenticeship and training scheme at its Luton DART project in April this year (Kier)

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