.12 Oct 2011 19:29
People are not believing that the proposed sales can generate the expected returns,” said one analyst who asked not to be named.
Analysts said the firm would also have to consider selling its outsourcing and water businesses, or attempt to raise cash through a rights issue or a debt-for-equity swap with its banks.
Consultant WYG took this option earlier this year, raising £30M in cash and wiping out £51M in debt by allowing its institutional investors to buy the majority of its shares (NCE 24 June). But this option may not even be open to Mouchel, which is perceived as offering little to investors.
“The banks are going to make sure they get their pound of flesh”
Analyst Arden Partners research director Geoff Allum
“I don’t see how they can get a fundraise away when there is no guarantee on earnings, there’s no chief executive and the new financial director has not come up with any new ideas,” said the unnamed analyst.
Allum said that the firm was “dead in the water” and undeniably vulnerable to takeover until it finds a new chief executive.
Mouchel’s current finances mean it would fail basic prequalification tests to win long-term contracts offered by local authorities, he said. Such work was previously a major source of revenue for the consultant.
“If its balance sheet gets sorted out then people will start giving them work again,” said Allum.
Selling parts of the company piecemeal appears to be the only option as the firm’s two most recent suitors are understood to have lost interest (see box).
“The feeling is that people don’t know what they’re buying if they buy the whole company, so they may wait for receivers to come in,” said the analyst source.
Even if the firm avoids a breach of its covenants, its banks could choose to step up pressure on its activities.
The banks − Royal Bank of Scotland, Lloyds TSB and Barclays − this week appointed accountancy giant KPMG to advise them on Mouchel’s financial situation.
“Its future rests on the attitude of the three banks,” said analyst Canaccord Genuity director for equity research Michael Donnelly.
“The banks are going to make sure they get their pound of flesh,” agreed Allum.
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