Kier investors bought just 37.66 per cent of its new shares under the group’s £264m rights issue, leaving lenders to buy the remaining shares at an inflated rate.
The contractor announced today that investors had bought just over a third of the new shares raised, leaving lenders to underwrite the remainder.
Kier is expected to receive the £250m cash proceeds by 28 December, with £14m spent in costs on the deal.
It said last month it would use the money to drive down debt and to mitigate against lending tightening to the construction sector.
Sky News reported Citi, HSBC and Santander were among the banks who would now be expected to buy the remaining shares at a significant cost.
It also reported brokers Peel Hunt and Numis Securities were among the joint underwriters of the rights issue.
In a trading update at 10.25am, Kier confirmed its “joint bookrunners” did not believe the remaining shares could be sold and would be taking on the remaining 62 per cent as significant shareholders as a result.
Kier’s share price has sunk by more than 40 per cent since it announced the rights issue on 30 November.
Its share price stood at 385p at close yesterday, short of the 409p price tag at which the new shares were raised.
After an early morning slump today its share price recovered to be trading down 1.5 per cent at 379p by mid-morning, still some way short of the 409p rights issue price.
Its short-sellers have reduced from more than 14 per cent to 11.7 per cent since the move.
The industry has been increasingly concerned by the move away from lending to the sector, with the Kier bill faced by banks likely to increase concerns.
However in the short term, the funds will give Kier reassurance going in to 2019.
Kier chief executive Haydn Mursell said: “Following the completion of the £250m rights issue, Kier enters 2019 with a strong balance sheet which puts us in an excellent competitive position.”
Speaking to Construction News, Applied Value analyst Stephen Rawlinson said the company’s move appears to have been justified, by giving it the cash it needed.
But he added: “For the sector, failure to get the shares placed is very bad news.
“It may have the effect of raising the cost of capital across the sector as a whole and certainly will make any further equity fund raises pretty expensive in the short to mid term.”
This morning it was announced that Kier has been appointed to deliver the construction contract for the P2 building in King’s Cross which will house part of Facebook’s new HQ.
Construction News revealed on Tuesday that the company was tipped to win the contract.
The 12-storey scheme will primarily comprise of office accommodation over nine floors.