Kier fundraising gets cool response from investors

By Arathy S Nair and Noor Zainab Hussain

(Reuters) - Investors took up just 38 percent of British builder Kier Group's <KIE.L> share issue on Thursday, highlighting growing nervousness about the construction and outsourcing sectors following the collapse of rival Carillion this year.

Kier's share sale, aimed at raising about 264 million pounds to bolster its balance sheet, comes as other outsourcing companies have shown signs of strain. Interserve <IRV.L> shares fell sharply last week after the support services group said it was in rescue talks.

Kier Group, which has contracts for major construction projects in Britain, including the Crossrail link across London, last month said it would offer investors 64.5 million new shares, or 33 for every 50 held, at a deeply discounted 409 pence per share.

The low level of take up from shareholders hit Kier's shares on Thursday. It also leaves the banks on the deal with a big chunk of shares on their books.

Kier's shares fell as much as 13 percent to a 15-year low of 335 pence, taking them to the bottom of London's midcap index <.FTMC>. They have already fallen 64 percent this year.

The company said joint bookrunners on the sale, Numis Securities, Peel Hunt, Citigroup <C.N>, HSBC <HSBA.L> and Banco Santander <SAN.MC>, would look to sell the remaining 40.2 million new shares not taken up, and have agreed to buy the shares if they are not sold by 1700 GMT on Friday.

When Kier announced the fundraising last month, the company said that banks were looking to cut their exposure to the British construction because of a change in sentiment from the credit markets.

"Following the completion of the 250 million pounds rights issue, Kier enters 2019 with a strong balance sheet which puts us in an excellent competitive position," Chief Executive Officer Haydn Mursell said in a statement on Thursday.

Peel Hunt analyst Andrew Nussey said: "The principal reason for the raise was the risks associated with the perception that net debt was too high."

"These risks had increased significantly in the period after the FY18 results."

The company said last month that its trading and outlook for 2019 were in line with its expectations.

It had said earlier that its order books and development pipelines remained strong, building on a higher-than-expected rise in annual profit reported in September.

Kier's net debt stood at about 624 million pounds at the end of October, according to the company, which also said the majority of its banking facilities are committed until 2022.

Kier expects to receive net cash proceeds of 250 million pounds from the share sale by the end of December.

(Reporting by Arathy S Nair and Noor Zainab Hussain in Bengaluru; Editing by Sai Sachin Ravikumar and Jane Merriman)