Troubled Mouchel negotiates new terms with banks

Outsourcing and engineering group Mouchel has reached agreement on new banking arrangements, but failed to ward off the bidders surrounding the group. The successful refinancing – albeit on more punitive terms than the previous facility – lifted some of the uncertainty surrounding the group's financial position, but not about its independence. Mouchel's future has been unclear since October, when the firm said it was in talks over its debt, sending its shares plunging and prompting civil engineering specialist Costain to bid for the group. Costain is offering 153p a share for Mouchel , mostly in Costain shares, valuing Mouchel at around £250m. But Costain may face competition, with the UK's two largest building contractors, Balfour Beatty and Carillion, as well as business outsourcing group Capita, all seen as possible bidders. The new finance deal means a higher interest margin for Mouchel and requires it to make a "voluntary repayment" of £30m by May of next year, or face a 2% rise in its interest payments. Mouchel said it has made "good progress" towards selling some non-core businesses. It will also be prevented from paying a dividend, a restriction that some analysts interpret as making an offer from elsewhere more attractive: if Mouchel shareholders were to accept Costain's bid, they would be entitled to receive Costain's final dividend worth 6.3p a share. The disposals are likely to include Mouchel's Middle Eastern business, which it had already said it planned to sell. Analysts also said that new data from Mouchel showed the company's pipeline of work was weakening. Kate Moy of Arbuthnot said: "While there has been a slight deterioration in the order book of Mouchel, which now stands at £1.7bn (versus £1.8bn at the end of November), the shocking figure is the decline in the pipeline of tenders and near-term opportunities which in late November stood at £2.6bn, but is now down at £2bn. As we suspected, while the refinancing process has been ongoing, Mouchel has struggled to regenerate its bid pipeline." Mouchel said it was reviewing the offers it had received: "We are actively reviewing all of the approaches that we have received and our other options. Our priority remains enhancing shareholder value and we continue to urge shareholders to take no action."