Costain's rescue success

Costain's financial rescue plan succeeded on Monday after œ74 million was raised through a rights issue. The contractor's net debt has now come down to a manageable figure of œ3 million.

The result is that Intria, the Malaysian-based construction group, now owns 40% of Costain shares after investing œ42 million and underwriting the issue. Intria has also taken four of the 10 seats on Costain's board. Costain's banks have taken a 2% stake.

The week was marred, however, by the announcement that UK conglomerate Lonrho had made a last-minute withdrawal from the œ40 million purchase of Costain's US coal division. " We're now hoping to rekindle interest shown earlier by other potential buyers," said a Costain spokesman.

By contrast a second sale, that of Costain's Land & Marine division, is still "on course". It should raise around œ10 million.

Costain called an extraordinary general meeting in London last week at which Alan Lovell, chief executive, proposed a three-for-one issue of 155 million shares at 50p - a move that would take Costain's total shares up from 53 million to a new total of 208 million.

Costain revealed that existing shareholders accepted 44% of the total on offer, the remainder being picked up by Intria and Costain's banks.

Members voted for the survival package despite opposition by Costain's two major shareholders: Mohamed Abdulmohsin Kharafi, a Kuwaiti construction group, and Raymond International of Saudi Arabia. Each held a 19% share.

Surprisingly, both did a U-turn after the egm and bought additional shares. Kharafi took up the whole of its three-for-one entitlement, spending œ15m to retain its 19% stake. After accepting half the extra shares on offer, Raymond's œ7.5 million spend gave it a new total of 12% of Costain's expanded shares.

A spokesman for the construction group said: "It's very satisfactory. We've ended up where we wanted to be. It's in line with our expectations."