Troubled FTSE 250 outsourcer Carillion's shares are tumbling for a third consecutive day over concerns that a rights issue will be required to bail it out from a debt pile larger than its current stock market capitalisation.
Although the warning of a £845 million hit to profits from four construction projects on Monday, and appointment of former Weir Group Chief Executive Keith Cochrane as stand-in replacement for Group Chief Executive Richard Howson will not have surprised investors (with up to a quarter of its shares on loan to hedge funds since the failure of merger discussions with Balfour Beatty in 2014 Carillion can already lay claim to the ignominious distinction of being the most shorted stock on the London Stock Exchange), the further revelation that it is experiencing difficulties in meeting the terms of its banking covenants has set alarm bells ringing throughout the City.
This disclosure would appear—for now at least—to rule out any possibility of a "white knight" rescuer emerging, with Balfour Beatty already declaring it is not considering a takeover.
Carillion's Board has been addressing concerns raised by a KPMG review of its activities in the United Kingdom, Canada and the Middle East where it has announced the partial disposal of a stake in Omani joint-venture company Carillion Alawi.
Additionally, the company has declared its intention to refocus on less capital-intensive support services and facilities management contracts, even in anticipation of a strategic review which is expected to be published in September.
In a week that has seen the value of the company's share price almost half, however, it remains to be seen how much stomach non-hedge fund investors have for a rights issue which will dilute their holdings even further.