Embattled shareholders of engineering group Jarvis will be left with less than five per cent of the company following a debt- for- equity restructuring.
The proposed financial rescue plan, which is needed to tackle debts of more than £300 million, was announced alongside confirmation that Deutsche Bank will offer loans totalling £31.4 million to meet short-term trading needs.
The extent of the dilutive impact on shareholdings will not come as a surprise to investors as the company warned last week it was considering a debt-for-equity swap that would leave them with ownership of five per cent or less.
Jarvis has been battling for survival after over-stretching itself on contracts, particularly in the area of private finance initiatives.
The debt- for- equity restructuring, which Jarvis hopes to complete by the end of August, will be followed by a £50 million share placing so the recapitalised company can pay back its loan to Deutsche Bank.
It warned alternative measures were being explored in the event shareholders rejected the swap, including a proposal providing no shareholder value.
Jarvis also updated the City on current trading, which it said continued to be challenging with turnover for rail and plant business below the level achieved in the first half of the financial year.
The second half is normally weaker for the roads business, although the loss of a contract in Cheshire had an additional impact.
Net debt was £305 million at the end of March, up from estimates of £280 million, as Jarvis took account of a number of factors, including the cost of exiting 14 of its largest construction projects.
It has already been forced to sell its most valuable asset - its stake in the Tube Lines consortium - for £146.8 million as part of efforts to secure sufficient working capital through to next March.
Jarvis will focus on UK rail renewal, roads and plant hire work as part of its strategy.
Shares in Jarvis closed last night up 0.5p at 8.25p.