The amount of cash set to be raised through rights issues in Europe over the next few months marks a new trend.

When Balfour Beatty won the contract to build the Aquatic Centre for the London Olympics last month, the celebrations were tinged with a little foreboding at the engineering and construction giant.

Zaha Hadid's ambitious design for the centre has been controversial since the outset, not least because its expected cost has trebled to £210m, and it was already beset with months of delays. It was clear Ian Tyler, Balfour Beatty's chief executive, was taking on years of heartache and wrangling, as well as a big contract.

But for shareholders, the contract win came as something of a tonic. The Government had stressed that, of all the things that could go wrong, the contractors were not to go bust before the centre was built. The win was yet more proof that Balfour Beatty, which at the end of 2007 showed nearly £380m of cash on its balance with no debt, was in rude financial health.

But less than a month later, on May 15, Balfour Beatty announced a shock capital raising: the company had placed 43.3m shares with institutions, raising £186m. It was the first time the company had tapped the market since its flotation nearly 10 years ago.

Shareholders were horrified. One said "The placing gave us a hell of a shock. The last numbers we had showed Balfour as having loads of cash. The first thought was, were the figures wrong, had something awful happened?"

Tyler was prepared. He told The Sunday Telegraph: "We had been really worried about the placing because raising money always comes as a bit of a shock to investors.

"Immediately it looks defensive or like trouble - you just have to hope investors aren't too surprised and listen to why you're doing it."

Tyler carefully explained that Balfour Beatty had grown fourfold in recent years, both organically and by a series of acquisitions, and needed more cash to keep growing. In addition, pressures have increased on construction firms to have a higher proportion of cash to prove their financial stability.

Tyler said: "About a year ago we knew that if we wanted to keep growing we'd have to raise more money."

As the credit crunch continued to bite, Tyler knew that it was never going to be good timing. He waited until the GMH deal was complete and, two weeks ago, went for it.

"We were particularly concerned because no one had done a placing for ages." he said. "But we were amazed that literally overnight, instead of being the only ones, we were suddenly one of many. "

After months of turmoil in the financial sector, investors had braced themselves for bolstering balance sheets at the banks. Royal Bank of Scotland, HBOS and Bradford & Bingley had announced plans to raise nearly £16bn.

The £50bn capital injection for business as cheap debt dries up
Last Updated: 12:30am BST 26/05/2008Page 1 of 3



The amount of cash set to be raised through rights issues in Europe over the next few months marks a new trend. Louise Armitstead reports

When Balfour Beatty won the contract to build the Aquatic Centre for the London Olympics last month, the celebrations were tinged with a little foreboding at the engineering and construction giant.


Zaha Hadid's ambitious design for the centre has been controversial since the outset, not least because its expected cost has trebled to £210m, and it was already beset with months of delays. It was clear Ian Tyler, Balfour Beatty's chief executive, was taking on years of heartache and wrangling, as well as a big contract.

But for shareholders, the contract win came as something of a tonic. The Government had stressed that, of all the things that could go wrong, the contractors were not to go bust before the centre was built. The win was yet more proof that Balfour Beatty, which at the end of 2007 showed nearly £380m of cash on its balance with no debt, was in rude financial health.

But less than a month later, on May 15, Balfour Beatty announced a shock capital raising: the company had placed 43.3m shares with institutions, raising £186m. It was the first time the company had tapped the market since its flotation nearly 10 years ago.

Shareholders were horrified. One said "The placing gave us a hell of a shock. The last numbers we had showed Balfour as having loads of cash. The first thought was, were the figures wrong, had something awful happened?"

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Tyler was prepared. He told The Sunday Telegraph: "We had been really worried about the placing because raising money always comes as a bit of a shock to investors.

"Immediately it looks defensive or like trouble - you just have to hope investors aren't too surprised and listen to why you're doing it."

Tyler carefully explained that Balfour Beatty had grown fourfold in recent years, both organically and by a series of acquisitions, and needed more cash to keep growing. In addition, pressures have increased on construction firms to have a higher proportion of cash to prove their financial stability.

Tyler said: "About a year ago we knew that if we wanted to keep growing we'd have to raise more money."

As the credit crunch continued to bite, Tyler knew that it was never going to be good timing. He waited until the GMH deal was complete and, two weeks ago, went for it.

"We were particularly concerned because no one had done a placing for ages." he said. "But we were amazed that literally overnight, instead of being the only ones, we were suddenly one of many. "

After months of turmoil in the financial sector, investors had braced themselves for bolstering balance sheets at the banks. Royal Bank of Scotland, HBOS and Bradford & Bingley had announced plans to raise nearly £16bn.

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But now companies as diverse as Johnston Press, the regional newspaper group, G4S, the security group, and FirstGroup, the rail and bus company, announced they were raising capital too. Now the City is bracing itself for fundraising by companies ranging from Barclays to Yell and Wolseley - although all three deny they have any need for the cash.

Last week the gloom that has recently enveloped investment banks was partially lifted with a sudden rush of activity in their equity capital markets division. One banker said: "Business has been slow for ages. But suddenly every chief executive wants to discuss capital raisings. We're booked up to the nines."

Based only on announcements by companies so far, $100bn of cash will be raised through rights issues over the next few months in Europe. Just under half - $45bn - will be raised in the UK. Analysts at Morgan Stanley predict that by the end of the year, these figures will have doubled.



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