Kier Group’s lenders face underwriting headache after rights issue

Kier Groups banks will be forced to fork out millions to buy shares in the construction outsourcer, after some of its biggest investors opted against taking part in a £250m emergency fundraising, according to reports.

The syndicate of five lenders, including Citi, HSBC and Santander, last month agreed to underwrite a rights issue by the crisis-stricken outsourcer, in which it offered investors to buy shares at a discount price to raise money.

But after some of the Kiers most prominent investors declined the offer, institutional investors have been left to pick up the pieces, Sky News reported this evening, with only half the newly offered stock snapped up.

Some of the remaining shares have been “sub-underwritten” and sold off to other institutional investors, leaving the syndicate with around £75m in shares, according to sources.

Four of the banks were reportedly obliged to stump up 22.5 per cent of the rights issue sum each, with the fifth holding 10 per cent.

Smaller brokers Peel Hunt and Numis Securities, who also agreed to jointly underwrite the fundraising, would then face paying around £17m for their share in Kiers equity.

Ken Odeluga, market analyst at City Index, told City A.M. at the time of the rights issue that Kiers success rested on how many investors bought the shares.

“If there is a good take up we might see a long term improvement for the company. If not its bad news,” he said.

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