With the help of law firm and corporate specialist Slaughter and May, UK construction company Jarvis has escaped the clutches of its creditors by offloading all private finance initiative (PFI) obligations and selling its stake in the Tube Lines project.
Jarvis sold Tube Lines to Amey for £146.8 million ($276 million), which comprises £95.5 million in cash, the release of existing cash collateral of £51 million (mostly relating to Amey's assumption of Jarvis' £45m equity bridge loan) and the release of a contingent liability of £11.7 million to subscribe for further loan stock in Tube Lines Holdings.
Slaughter and May helped Jarvis create a dual trust structure for the 14 PFI contracts under which the company and the equity and debt providers will all pay enough into independent trusts for the projects to be completed (Jarvis paying around £51 million), rather than paying them directly to the company itself.
As a result of this reorganisation. the Jarvis board also announced that it had signed binding agreements with its core lenders for the extension of its financing arrangements through to 27 March 2006.
The deal had been agreed in theory among the various parties on December 22 2004, but only yesterday could the company announce that all the legal wranglings were over and the contracts signed.