Costain hits back at critics

Costain, the troubled construction group, yesterday rejected criticism made by a large Middle East shareholder against a controversial refinancing plan and urged investors to vote in favour of the deal next week.

The Kuwaiti construction firm Kharafi, which owns 19 per cent of Costain, has accused the company of trying to railroad investors into accepting the rescue, saying it would vote against the plan at a shareholders' meeting in London on Monday.

But yesterday Costain hit back. "The proposals are the only realistic [ones] available to secure the future of the company for shareholders," a statement said.

Costain also noted that a recent circular sent to shareholders made it clear that the rescue package was the only way of securing continued support from the banks to continue trading. "Any suggestion of a three-month moratorium is therefore unrealistic," it added.

Costain's chief executive, Alan Lovell, has threatened to put the company into administrative receivership if the proposals are rejected.

The rescue deal involves a pounds 73.6m share issue which would give up to 40 per cent of the enlarged share capital to a Malaysian construction group, Intria Berhad. Costain's bankers could be left with up to 35 per cent, depending on the take-up of the three-for-one offer at 50p by existing investors.

Costain said it had received strong support from UK institutional shareholders. Its hopes of securing approval for the deal received a boost on Monday when M&G, which speaks for 7.36 per cent of Costain, came out in support of the deal.

However the outcome of the vote is likely to hinge on Saudi-based Raymond International, which holds 19 per cent. It has yet to comment about its intentions.