A quoted infrastructure contracting group operating across the railway network and involved in the PFI sector. The Group encountered a fall-
The subsequent development of robust insights into cash requirements identified a lack of effective cash management controls across the business. It also highlighted issues with WIP valuations resulting in a restatement of future expectations and historic profitability. Share price suffered accordingly
As a consequence lenders, bond holders and bond providers lost confidence in the business and were concerned about the sizeable cash requirement which emerged.
To create some stability for the business whilst the clarity was provided around contracts, WIP treatment and impact on future profits and overall cash requirement to stabilise the operations, the Groups financiers were encouraged to form a steering committee.
The Group’s financing by Banks, Bondholders and Insurance Companies providing a range of debt and performance bonds in both the contracting and PFI businesses created considerable conflicts of interest between the various parties.
Financiers were shown the likely loss of value to them if the business were allowed to fail, which avoided any precipative action being taken whilst a coherent recovery strategy was developed and implemented.
Agreement was reached between the various parties to allow new cash to be introduced on a priority basis to sustain the business pending a restructure being implemented.
Serious loss of value across all stakeholder groups was avoided.
The Group’s finances were restructured with some debt classes being equitized, allowing the business to effect operational changes whilst protecting the various PFI projects and seeing them through to completion.
Nature of Support
Case Details: UK Railway and Infrastructure Group