City fears Jarvis loans breach

FEARS that deeply troubled Jarvis could go bust this summer are sweeping the City after top-rated analysts warned the rail engineer and school buildings contractor could already be in breach of its banking covenants.

With profits plummeting this year by more than 75% and cash streaming out of the company, stockbroker Investec says Jarvis debt could now be as high as £140m, with the company increasingly unlikely to be able to meet interest payments to its bankers, led by Barclays and the Royal Bank of Scotland.

'The risk of breaching banking covenants remains high,' said Investec's Geoff Allum. 'If they are not already in breach they could be within the next couple of months. If that is the case, then its banks have some pretty tough decisions to make.'

The company, chaired by London mayoral hopeful Steve Norris, recently admitted liability for the fatal Potters Bar derailment two years ago.

It is currently in the middle of a fire sale of investments, including half of its one-third stake in the London Underground maintenance company Tube Lines.

Reiterating his advice today to sell the stock, Allum added: 'Any valuation would not be worth the paper it is written on. Jarvis has a tarnished reputation. The most critical issue remains the bad publicity Jarvis has attracted.'

The shares plunged to an eight year low of 70p last week.