It appears investors in construction firm Kier (KIE) are losing faith in the business as its heavily-discounted £264m rights issue secured only 37.6% support, prompting a 3.5% fall in the shares to 371.6p.
Kier has long been under pressure, more so since the collapse of rival outsourcer Carillion earlier this year.
‘While Kier still gets the full amount of money because the rights issue was fully underwritten by five banks and brokers, its credibility will remain in tatters because of the poor take-up by shareholders,’ comments AJ Bell’s Russ Mould.
The company is currently one of the most shorted stocks in the market as sellers are betting on high debt levels and exposure to potential contract delays hitting the already-depressed share price.
Shares in Kier are trading at lows the stock hasn’t seen since early 2001.
In an interview with Shares, chief executive Haydn Mursell says the rights issue was undertaken to appease lenders worried about paying suppliers faster and ensuring a strong year-end cash balance.
Similar to Carillion, Kier uses supply chain finance, whereby suppliers sell their invoices to a bank at a discount to essentially get paid immediately before the bank collects later on.
This method is good for supporting short-term working capital, but can obscure the true health of the balance sheet.
