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AssetCo funding woes puncture takeover talks
AssetCo, the supplier of fire engines and appliances to the London Fire Brigade, has sparked new fears about the health of the support services sector after warning it urgently needs to find £4m to repay debt.
Shares in the company shed 22pc yesterday as AssetCo called off takeover talks with an unnamed suitor in order "to concentrate on the company's short-term issues".
The £4m requirement has been sparked by debt demands from trade creditors and a delay to long-term refinancing talks.
AssetCo's directors said they are considering an equity fundraising to fill the funding gap.
"Whilst the directors remain confident that the refinancing will be delivered before the financial year end, the delay has led to a significant strain on the cash resources of the business," a statement said.
AssetCo has a 20-year PFI contract to own, maintain, and manage all of the London Fire Brigade's front line vehicles and equipment. It is also contracted to provide 700 reserve firefighters in case of "extreme situations", and has operations in Lincolnshire and the UAE.
A spokesman for London Fire Brigade said: "AssetCo continue to provide services to London Fire Brigade completely in line with our contractual requirements. We have no reason to expect any imminent service failure."
AssetCo is in talks with lenders about a short-term facility of £3.5m that will allow it to repay the majority of the immediate £4m requirement.
However, the company warned it will still need to reach an agreement on a longer-term refinancing to "meet the short-term working capital requirements of the business".
AssetCo is in talks with its lead bank, Royal Bank of Scotland, about a deal that will lead to £50.6m of debt being repaid and £8.5m of working capital being released.
Shares in AssetCo, which made a pre-tax profit of £3.4m in the six months to September 30 on revenues up 4pc, tumbled 10 to 36p.
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