Mouchel shareholders lose out as banks leave them with just 1p per share

Shareholders in Mouchel will receive just 1p per share after the motorway maintenance firm struck a deal to hand over control of the business to its banks.

After months of negotiations over mountainous debts, executives and lenders reached an agreement over a ‘debt for equity swap’ that will let the company carry on trading.

In exchange for writing off £87m of debts, a consortium of Lloyds, Barclays and Royal Bank of Scotland will take ownership of the company, leaving it with debts of £60m.

The move will safeguard the company’s 8,500 jobs and mean it can carry on ‘with business as normal’, chairman David Shearer said.

Agreed: Under the deal, Mouchel will reduce its £140m debt pile by £87m

Agreed: Under the deal, Mouchel will reduce its £140m debt pile by £87m

But investors will receive a 1p special dividend before seeing their holdings wiped out. Shares fell 1.16p to 1.04p.

Shearer said that he and Grant Rumbles, the chief executive who kicked off the restructuring process after taking the helm in October, would stay on at the company until it was rebuilt.

The company, which provides consulting and business services on road building and other public sector projects, will be delisted on September 25 after the  special dividend to shareholders. The agreement is subject to the approval of investors at a general meeting on August 24.

 

Chief executive Grant Rumbles said the restructuring represented the 'best possible outcome' for stakeholders, as well as safeguarding existing customer and supplier contracts and preserving job security.

Mouchel chairman David Shearer said: ‘In reaching this agreement with our lenders, we have sought to ensure that our shareholders have the opportunity to recover some value from their investment.’

Embattled: Mouchel shares dived over the last year after it turned down two takeover approaches from rivals Costain and Interserve

Embattled: Mouchel shares dived over the last year after it turned down two takeover approaches from rivals Costain and Interserve

The group has been hit by Government spending cuts and has seen its shares dive over the last year after turning down two takeover approaches from rivals Costain and Interserve saying their £150million offer ‘significantly undervalued’ the business.

Since then, shares have crashed from 147.5p to today’s value of 1.05p.

A boardroom clear out in October saw chief executive Richard Cuthbert forced from his post as the group issued a stinging profits warning.

Days later, chairman Bo Lerenius also left his role as Rumbles took the helm. But the group’s new chairman, David Sugden, quit after just three days in the job as the company lurched from one crisis to the next.

Andy Brown, analyst at Panmure Gordon, said: 'While this is a poor outcome for shareholders it should ensure that existing contracts are delivered and employment of around 8,000 people is maintained.'

The management team has carried out a strategic review, which will see it make £21million of cost savings - most of which are expected to have been implemented by September.

It is understood that these mainly relate to 'systems and processes' and will not necessarily involve significant staff cutbacks.