The pressure on construction firm Kier (KIE) continues to mount amid reports that its lenders are looking to offload the company’s debt to hedge funds.
The news sent the shares down 7% to 109p in early trade on Monday. A year ago the stock was valued at more than 900p.
The Sunday Telegraph reported at the weekend that banks are marketing the borrowings as low as 70p in the pound (effectively taking a 30% hit) to specialists in distressed debt. Hedge funds are reckoned to be planning to use this as a way of gaining control of the business.
The company has not yet responded to the claims but the outsourcing/construction space has endured its fair share of corporate disasters in recent years – most notably with the liquidation of Carillion but also with Interserve where investors were wiped out in March but the firm continues operate.
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Data from research house Edison covering the most shorted stocks in October 2019 show 8% of Kier’s issued share capital is being shorted (investors are betting on the share price falling further).
The pressure on new CEO Andrew Davies, who took over in April, looks unrelenting. He will attempt to simplify the business, sort out the balance sheet and cash flow problems and stem the losses.
This looks a similar path to that trodden by its peer Balfour Beatty (BBY) under turnaround specialist Leo Quinn. But Quinn has been at Balfour since 2015, giving him a fair window of opportunity to tackle its problems. Davies might not get the luxury of as much time.