Mouchel To Sell Rail Unit To Australia's SKM

Crisis-hit British infrastructure and maintenance group Mouchel will sell its rail business and associated assets to Australia's Sinclair Knight Merz (SKM) for 3.4 million pounds ($5.3 million) in cash to help repay its debts.

Shares in Mouchel have slumped 90 percent since March as its public sector clients slash budgets and the company is now grappling with a management vacuum after losing its chief executive, chairman and interim chairman so far this month.

Mouchel, whose board rejected three takeover offers since early 2010, said last week it was likely to breach loan agreements having warned on Oct. 6 that contract blunders would help slice about 60 percent off anticipated profits.

Mouchel said on Monday that under the terms of the sale it hoped to claw back an additional 2.5 million pounds in cash having retained certain assets of the business such as money owed by debtors and contracts where work is already underway.

It said SKM, an Australia-based, staff-owned building engineer, would help it collect those outstanding bills in return for a 5 percent administration fee.

The transaction is due to be completed on 31 October 2011.

Analysts said the company needed to do a lot more to bring itself back from the brink, however.

David Brockton at Espirito Santo Investment Bank said the sale would provide only a small contribution to reducing the company's 87.4 million pound debt pile and meeting a deadline agreed with its banks of repaying 30 million pounds by the end of May 2012.