(Updates with closing share price.)
Oct. 13 (Bloomberg) -- Mouchel Plc, the U.K. provider of highway maintenance services that said last week an accounting error would cut profit, said lenders are reviewing the books as it’s likely to breach banking covenants.
“We do expect to breach our banking covenants at the end of our financial year,” interim Chairman David Sugden said in a phone interview today. “The banks have put in accountants to look at the business to make sure the reviews are complete.” Accounting firm KPMG LLP is preparing a review on behalf of lenders, he said.
Mouchel shares dropped to a record low. The company has lost two-thirds of its value since saying “an actuarial error” erased 4.3 million pounds ($6.8 million) of profit from a contract. Chief Executive Officer Richard Cuthbert resigned last week, and Bo Lerenius stepped down as chairman today.
Lerenius, who was non-executive chairman, resigned as “he didn’t have the time to devote to Mouchel for what it needed in the current situation,” according to Sugden, who took over as chairman at Findel Plc last April after the home-shopping company reported accounting irregularities. His own experience is “more appropriate” in a financial restructuring situation, he said.
Mouchel announced Grant Rumbles as the new CEO in a statement today.
Mouchel shares fell 17 percent to close at 10.75 pence in London trading. That gives the company a market value of 12.1 million pounds. Earlier this year, the Mouchel board rejected an approach from Costain Group Plc that valued the shares at 164.26 pence each. The Financial Times said last week Mouchel was now open to takeover offers, citing unidentified people “close” to the company.
“Obviously any responsible board has to consider approaches on their merits, but we see the ability to get the share prices to a lot higher before we wish to go down that road,” Sugden said today.
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