Citu NQ Salboy November 2018
Citu NQ was one of Forrest's problem contracts

Forrest fails to secure refinancing deal

Charlie Schouten

Troubled contractor Forrest has confirmed it has been unsuccessful in securing a refinancing deal with the business now in discussions with a number of parties over the sale of its social housing and energy businesses.

The Bolton-based contractor was earlier this month forced to deny rumours it was close to appointing administrators, and instead said it was looking to refinance after being hit by a series of problem jobs.

Place North West revealed last week that a sale of the company’s social housing and energy arms was being explored with a refinancing deal looking unlikely, and the company has now confirmed it would be looking to offload the businesses after receiving offers from several parties.

Discussions over the future of the company’s new-build business, which has borne the brunt of its problem contracts, are understood to be ongoing.

The company is understood to be struggling with three problem jobs in: Citu NQ in Manchester’s Northern Quarter for client Salboy, where the contractor is believed to be losing around £2m; and two projects for X1, the Plaza and the Gateway.

In a statement, the contractor’s chief financial officer Keith Reid said: “Over the last few weeks our efforts have been focused on trying to secure a refinance deal and the various contingency plans for the business.

“It has been an extremely difficult period and, unfortunately, we have not been successful in securing new funds. The debt markets remain cautious of the construction sector and this combined with a level of cautiousness relating to the challenges the business faced prior to the March 2017 refinance, meant that it wasn’t possible to secure new debt finance. Our shareholders also attempted to find an equity solution, but all options would have required some new debt funding.

“We have also been going through a due diligence process with various parties interested in the energy and refurbishment side of the business, which has performed well over recent years. A number of offers have been received and we will be finalising agreements for the disposal of these divisions over the coming weeks. This transaction will be covered under TUPE and all staff working on those contracts which are successfully novated will transfer.

“I would like to extend my thanks to the entire Forrest team, our customers and suppliers for their continued patience in what has been an extremely challenging period. We are continuing to work with FRP Advisory throughout the process.”

Reid had previously admitted the company had made “a series of incorrect pre-construction estimates” on some of its projects, and at Citu NQ, the contractor is now being replaced by Domis, the firm set up by former Forrest chief executive Lee McCarren. Domis hoardings have already appeared around the site this week, pictured below.

Domis Citu NQ

Forrest has found itself in difficulty after it unearthed a pre-tax loss of £26m last year, which it said was down to accounting “errors”.

The company had previously reported a pre-tax profit of £3.6m in 2015 but this was revised heavily downwards to a pre-tax loss of £19.2m. This was followed by a £6.8m loss for the year to 29 February 2016.

Following this, the Greater Manchester Combined Authority agreed to step in with a £2m finance package to keep the contractor afloat. The GMCA was a new lender to the group replacing the Royal Bank of Scotland. At the time, Palatine Private Equity remained as majority shareholder, alongside Lloyds Development Capital.

Mark Nicholson, Carillion’s former managing director of building for the North, Midlands, South West, and Scotland, took over as chief executive in September 2017, following the exit of McCarren.

The company’s former finance director, Matthew Farrimond, was also jailed this summer for siphoning off nearly £370,000 from the company during his time in charge.

He was jailed for four years at a Bolton Crown Court hearing in June this year.

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I’m sure them suppliers you have just shafted Keith are extremely appreciative of your thanks.

By Oscar