Shares in Carillion (CLLN) have crashed after the troubled construction and services company issued its third profit warning in a year and said it expected to breach covenants with lenders.
The stock tumbled to the bottom of the FTSE Small Cap index, down 37.6% at 25.9p, having opened 59% down.
Carillion said it expected to breach covenants at the end of the year, and had extended financing agreements until the end of April after talks with its lenders.
By that time, the group hopes to have completed a recapitalisation plan, which it said would be announced 'in due course'.
'Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce debt and rebuild the balance sheet,' said interim chief executive Keith Cochrane.
Shares in Carillion are down 89% this year as the company struggles to deal with mounting costs on its construction contracts.
In interim results issued in September, the group had forecast meeting covenants in December.
But it said that since then 'delays to certain public private partnership disposals, a slippage in the commencement date of a significant project in the Middle east and lower-than-expected margin improvements across a small number of UK support services contracts... will lead to profits for the year to 31 December 2017 being materially lower than current market expectations'.
Liberum analyst Joe Brent said he expected the group's recapitalisation would take the form of a debt-for-equity swap.
'We believe that at least one of the banks has already written off part of the debt. Equity does not normally have much value in these circumstances,' he said.
Peel Hunt analyst Andrew Nusset suspended his rating on the company and said he saw 'little value currently for equity holders'.
Nicholas Hyett, equity analyst at Hargreaves Lansdown said Carillion had proved a 'horror show' for investors.
'Some sort of recapitalisation was inevitable, but a possible debt for equity swap, with debt even higher than the group had anticipated, is probably as bad as anyone would have guessed,' he said.
'The group has made some progress on asset sales, and it sounds like some cost savings are being made. It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.'
Carillion's crash overshadowed other market moves. The FTSE 100 fell 10 points to 7,377, with United Utilities (UU) the biggest faller, down 4.4% at 797.5p after analysts at HSBC downgraded the stock to 'hold' from 'buy'.
Sky (SKYB) was the biggest riser, up 3% at 930p, after Reuters reported US media groups Comcast and Verizon were eyeing a bid for Twenty-First Century Fox assets including the broadcaster.