Construction News

Sun June 13 2021

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NMCN gets overdraft extension as refinancing negotiations drag on

28 May Publicly listed construction contractor NMCN says it “will need to consider all appropriate options” if it cannot conclude its refinancing in the next four weeks.

NMCN has been trying to sort out new financing since last autumn but meanwhile its losses have been mounting.

NMCN appointed Arrowpoint Advisory, part of Rothschild & Co, in September 2020 to help secure a medium-term debt package “more appropriate to the size and nature of the group's businesses and risk profile, which also takes into account the change in payment terms on the new framework agreements”.

On 23rd December the board said that it expected this debt package to be in place by the end of February 2021, although it warned there had been “some creditor stretch in recent weeks”.

Three months later and far from reaching a solution, things have got worse. The company's overdraft facility with Lloyds Bank plc has been extended into June to accommodate the continuing financing discussions.

In October NMCN said that it expect to make a pre-tax loss of between £13.5m and £15.0m for 2020. In December this figure became £16.5m. Now it says its expects to report overall underlying losses before tax of £24m when its 2020 results are published at the end of June.

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In a trading update today, NMCN said: “As previously notified the company has been working since Q4 2020 to secure a financing package more appropriate to the size and nature of the group's businesses and risk profile. This has been a core focus of the board in light of a number of contractual issues exacerbated by the Covid-19 pandemic which have resulted in the group now expecting to report overall underlying losses before tax of £24m, approximately £6m of which are attributed to 2019. These issues have presented significant challenges requiring the board to actively manage the group's working capital whilst work on the refinancing has been undertaken.”

It continued: “The company is pleased to report that discussions are progressing well with a number of interested parties. The board has now received heads of terms and is working towards concluding an agreement during June. If the group is unable to secure commitment for the requisite level of funding to satisfy its ongoing working capital requirements, then the company will need to consider all appropriate options.”

Meanwhile there are also problems on the construction side to deal with. “We are dealing with some performance issues in our Building business unit and are still experiencing a number of challenges on two loss making contracts in Water which will impact current year performance,” the board said.

New chief executive Lee Marks, who only started this month, is conducting his own review. He said: "I was delighted to join the company as chief executive earlier this month, as I see a business with a significant depth of expertise focusing on attractive and appropriate addressable markets. The combination of internal issues and the COVID-19 pandemic has undoubtedly created very challenging circumstances for NMCN over the course of the last 18 months and I would like to thank my colleagues for their efforts. There is certainly much to do but with progress toward an appropriate financing structure being made I look forward to the challenge."

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