EXETER: Yesterday banks granted Connaught, the embattled local authority service provider, a £15m overdraft facility giving the company time to negotiate a deal with lenders and safeguard its longer-term future.
Connaught warned earlier this week that it was in urgent need of additional funds, in part because suppliers and subcontractors, which include Travis Perkins and BSS Group, had exerted "additional pressure" on the group since it issued a profit warning last month, the Financial Times reported.
Some suppliers confirmed on Thursday that they had indeed asked Connaught for larger upfront payments in recent weeks. They added that the funding agreement unveiled on Thursday had helped allay their worst fears.
An executive at one of Connaught's biggest suppliers said: "There is pressure from suppliers, but it is reasonable pressure given the current situation. We have to find a balance between reducing our level of concern and what they need to keep going," the Financial Times said.
Although the cash injection gives Connaught some breathing space, the group is still set to breach the terms of its loans as it warned earlier this week that net debt would be higher at its financial year- end next month than the £120m it had previously advised.
Shares in Connaught, which lost much of their value after last month's profit warning, recovered 4.52p, or 14.6 per cent, in the wake of the announcement, to close at 35.52p.
