Jarvis' bank debt has plummeted to 45-50 from the 70s after a bank meeting on April 22. The British rail track contractor stated it does not have enough cash to continue its operations and has asked its lenders to contribute more capital, according to European investors. A Jarvis spokeswoman declined to comment.
The original lenders included Barclays and the Royal Bank of Scotland. But a group of 8-10 U.S. investors, including Strategic Value Partners and Canyon Capital, are now reportedly holding the debt. Goldman Sachs is said to be active in the name, but it could not be determined if it is holding the paper.
Victor Khosla, chairman and ceo of Strategic Value Partners, declined comment and Desmond Lynch at Canyon did not return calls. A Goldman banker declined comment.
In addition to asking for more cash, Jarvis has proposed a debt-to-equity swap that the market values at £250 million. Jarvis has approximately £250 million of bank debt and £100 million of off-balance sheet debt, one investor said. A deal is expected by the end of July, giving 80% of equity to the creditors. Even if that solves Jarvis' short-term debt problems there are still questions of whether the company will generate enough cash to keep the business running, one European buysider noted. The spokeswoman said it would be premature to comment on restructuring options.
The company has been struggling since May 2002 when a train was derailed in Southern England. The company also overpaid for rights to run Private Finance Initiative (PFI) contracts with the U.K governments. Since then, the company has exited the PFI contracts and has sold its stake in the London Underground for £147 million.