MOUCHEL yesterday confirmed Deloitte has been drafted in to examine how far the firm’s future income could drop, sparking fears it could follow Connaught and Rok into administration.
The engineering consulting and design group has been rocked by swingeing cuts in government spending, resulting in the haemorrhaging of contract income.
Deloitte was called in by the firm’s lenders – including Royal Bank of Scotland (RBS), Barclays and Lloyds – to complete the review before it refinances its £190m debt pile.
Mouchel is already spending huge sums to service its debt and if its banks are forced to lend it more it is likely to be at sky-high rates. Almost a third of Mouchel’s debt is due to be paid back in 2012.
Industry sources told City A.M. the review does not mean Mouchel will follow in the footsteps of Connaught and Rok. However, the news is likely to spook investors who have already been hit by a series of profit warnings.
A company spokesman said: “Mouchel confirms that Deloitte has been appointed by its lending banks, with the agreement of the company, to perform a limited scope review.
“Mouchel continues to expect the refinancing to be completed by the time of its interim results in March 2011. Its banks remain supportive.”
Mouchel, which works on government projects such as highway maintenance, slumped to a full-year loss in October and warned of an uncertain outlook due to government austerity measures, which has wiped more than a quarter from its stock market value this year.
GERRY Loftus, national head of reorganisation services at Deloitte, is understood to be overseeing the Mouchel account.
He joined Deloitte in May 2001. Before this he worked in PwC’s financial advisory services division for 14 years, seven of which he was a partner.
He specialises in reviewing the business strategies of medium and large firms in financial trouble, including developing turnaround strategies and balance sheet reconstructions.
Earlier this year Loftus is understood to have worked on the restructuring of troubled UK-based Greek telecoms giant Wind Hellas, which had only just emerged from administration.
CONNAUGHT | BLAMES CUTS
Social housing repair firm Connaught put most of its business into administration after its lenders refused to fund the company further.
The FTSE 250 member said its public sector business will be put into the hands of administrators KPMG, though its environment and compliance arms will remain in operation. The company blamed government spending cuts for its dire financial state. Unsecured lenders exposed to the firm’s social maintenance arm will recover at most one penny in the pound.
It had around £220m of debt, provided by six banks and four other creditors.
Connaught drafted in Deloitte to examine its accounting practices in July, the results of which have not been made public. The Connaught administration will be one of KPMG’s largest jobs in several years.
ROK | NEXT DOMINO TO FALL
Rok said it would go into administration and trading in its shares was suspended.
Just 500 jobs out of a workforce of 3,800 look set to be saved after PriceWaterhouseCoopers (PwC) found buyers for only parts of the firm.
PwC said it had sold parcels of the construction and social house building division to Mansell Construction Services, a subsidiary of Balfour Beatty, saving 381 jobs. PwC is retaining a team of 200 people across the group to help wind up the business but these jobs will go once the parent group closes.
In September Rok cleared its former finance director Ashley Martin after an investigation failed to uncover any evidence of malpractice on his behalf related to problems at its plumbing, heating and electrical unit.