Kvaerner's cash crisis worsens

Kvaerner is struggling to stay afloat

Kvaerner ,the Anglo-Norwegian construction giant, has warned that it may not be able to meet its financial commitments in the third quarter of this year.

The firm, which employs 35,000 people, is desperately fighting off bankruptcy.

During a tumultuous few weeks, the firm has seen the resignation of its chief executive, its shares suspended on Oslo's stock exchange, and its credit rating downgraded.

News of deeper financial woes comes just two weeks after some of Kvaerner's banks threw the company a lifeline by offering short-term debt relief.

But the firm has now admitted that its financial woes are deeper than had been thought.

Cash-raising efforts

"It cannot be ruled out that the company is in violation of its financial covenants at the end of the third quarter," said Kvaerner in a statement.

Kvaerner employs 35,000 people

The firm has said that it is in talks with lenders to be allowed greater leeway in the case of a violation.

The company blamed problems in its pulp and paper and engineering and construction divisions for the worse than expected figures.

In a desperate attempt to raise cash, the company has already convinced banks to accept delayed payments of loans, restructured its short-term debt into a three-year loan, and received an injection of one month's salary from every employee.

Long term upturn?

Despite the bleak outlook for this year's results, the firm remains optimistic about the possibility of a longer term recovery, projecting a sharp rise in earnings in 2002 and 2003.

The firm forecast an operating profit of 918m kroner (£71.75m; 114.5m euros) for 2001, rising to 1.7bn kroner in 2002 and 2.2bn kroner in 2003.

Shares in Kvaerner dropped 3.7% following the warning.

Investors have seen the firm's stock slump from as high of 78.5 kroner on 29 May to a low of 5 kroner last month.