July 14, 2017 / 7:00 AM / a month ago

Battered Carillion turns to HSBC amid rights issue talk

A Carillion sign can be seen on a van in Manchester, Britain July 13, 2017.Phil Noble

(Reuters) - Crisis-hit Carillion (CLLN.L) hired HSBC (HSBA.L) as joint financial adviser and joint corporate broker on Friday, fuelling speculation that the construction and support services company was preparing a rights issue.

Carillion, which had seen 70 percent wiped off its market value this week, is reviewing "all options" after it booked a 845 million pound writedown on Monday against customer payments it no longer expected to be able to collect.

Analysts believe Carillion might have to raise at least 500 million pounds via a share sale or that a debt-for-equity swap could be on the cards to shore up the balance sheet.

Its average net borrowing in the first half of the year rose to 695 million pounds from 586.5 million over 2016.

Shares bounced 9 percent to 60.65 pence by 0735 GMT, valuing the company at only about 250 million pounds.

Carillion shares have been in freefall following the profit warning and exit of its chief executive at the start of the week. Its bondholders have braced for "painful" talks as a pile-up of receivables and debt spooked investors.

HSBC, which has been part of Carillion's banking group in the past, joins Morgan Stanley and Stifel as Carillion's existing corporate brokers and Lazard as its financial adviser.

A source said HSBC would complement Carillion's existing advisor line up.

"With (HSBC) having a long-standing relationship with Carillion, they're quite supportive at this time," the source said.

HSBC, which was Carillion's adviser on its failed attempt to take over peer Balfour Beatty (BALF.L), relaunched its corporate broking in January 2013, and has since been targetting more mandates.

Carillion was demerged from the Tarmac group in 1999 and went on to buy construction firm Alfred McAlpine. The company has worked on projects ranging from London's Tate Modern gallery to the Twickenham rugby stadium.

Reporting by Esha Vaish in Bengaluru; editing by Jason Neely/Keith Weir

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