Kvaerner's banks offer life-line

Kvaerner will work hard to rebuild its financial strength

Kvaerner has been given a breathing space that will allow it to continue its desperate struggle to stave off bankruptcy.

Mr Rokke's Aker Maritime has been less helpful than hoped

The Anglo-Norwegian engineering and construction group, who employs 35,000 people, continues its search for guarantors to back its efforts to raise fresh cash from investors.

Kvaerner has convinced its banks to accept delayed payment of an 800m Norwegian kroner($92m, £63m) loan until 31 December.

In addition, the banks will begin work to restructure the company's short-term debts into a three-year loan.

"After the clarification with the company's main banks, Kvaerner will now try to create a guarantee consortium for the new [convertible bond] issue," the company's board said in a statement.

Cash found so far

Kvaerner had initially tried to raise 2bn kroner through an issue of new shares.

Mr Almskog resigned last week

It is now planning to issue a three-year convertible bond which can be converted into shares later due to uncertainty about the value of the company's shares.

So far, three of its large share holders, Siem Industries, Den norske Bank (DnB) and Folketrygdfondet, the Norwegian State's pension fund, have agreed to underwrite about 500m kroner of the bond issue.

In addition, one of the company's industrial plants in Rosenborg, Norway, has agreed to back its parent with a 100m kroner issue.

And all Kvaerner employees in Norway have agreed to inject one month salary each in fresh capital for the company.

Control

Kvaerner is trying to raise at least one billion kroner and up to two billion kroner by issuing new shares in a push to sort out its short-term financial problems.

The company's net debts have risen from 5.6bn in June to 6.4bn. On Monday night, its credit rating was downgraded by Moody's Investor Service.

Initially, the company had high hopes that a helping hand would be lent by the flamboyant billionaire industrialist Kjell Inge Rokke whose company Aker Maritime controls 18% of Kvaerner's shares, making it the largest single share holder.

But the help offered by Aker Maritime was not what Kvaerner's board had expected.

Rather than stepping in to guarantee the share issue, the company has reportedly offered to lend money to Kvaerner, using a financial vehicle called a convertible loan.

The debts owed to Mr Rokke would be converted into Kvaerner shares at a later date, thereby giving him a controlling equity stake in the company, according to the Norwegian newspaper Dagens Naeringsliv.

The trading of Kvaerner's shares were suspended by Oslo Stock Exchange on Monday and Tuesday.

After trading resumed early on Wednesday, the stock slipped 20% by 0940 GMT.

Last week, the share fell from about 30 kroner on Wednesday to a historic low of five kroner on Thursday, before bouncing back to 8.80 kroner by Friday's close.

Trafalgar House

Kvaerner's financial difficulties stem from an acquisition of its UK competitor Trafalgar House in the mid-1990s.

The acquisition instantly doubled the size of the company, but its debts ballooned as well.

Initial plans involved the merger of complementary units to create a strong core business, followed by the sell-off of non-core units.

The expensive restructuring that followed quickly began to eat into the company's cash reserves, resulting in the resignation of former chief executive Erik Tonseth, the man spearheading the take-over.

Last week, chief executive Kjell Almskog resigned.