Capita chief turns to Carillion advisers as debt problems mount

The troubled outsourcing giant which collects the TV Licence Fee has turned to the same bank which advised Carillion (Frankfurt: 924047 - news) in the months before the construction giant's collapse.

Sky News has learnt that Capita (LSE: CPI.L - news) , which shocked the City with a massive profit warning last week, has drafted in Lazard (Frankfurt: A0DQP8 - news) in recent days to advise on financing options.

The move comes just days after Capita's new chief executive put another set of financiers on standby to raise ‎£700m from a rights issue, which would involves the sale of new shares to investors.

Its decision to bring in Lazard is in one sense curious because the company has stressed that it does not bear comparison with Carillion, which was forced to call in liquidators last month.

However, sources close to the appointment said the team advising Capita was largely different to the individual bankers who had worked with the HS2 contractor.

Capita delivers a wide range of service to private and public sector clients which include the NHS, Ministry of Defence, the Co-op Bank and Three, the mobile phone group.

Unlike Carillion, which was largely a construction and facilities management provider, its focus is ‎on high-value, technology-enabled specialist services.

CEO Jonathan Lewis, who joined Capita three months ago, ‎said last week that while profits for the financial year would be up to 30% lower than City forecasts, the company was not heading into the abyss.

"We are not under some existential threat," he said in comments reported by The Times.

"Did we buy up too many businesses over the last few years with too much debt on our balance sheet? Absolutely.

‎"I understand why people are making comparisons to Carillion but they are just not appropriate."

The troubles at Capita have been seized upon by Labour as further evidence that the involvement of private enterprise in the delivery of public services has been a dangerous failure.

Mr Lewis's "kitchen-sinking" of Capita's woes has also piled further pressure on KPMG, which audits it and faces parliamentary and regulatory scrutiny‎ over its work in the same role at Carillion

Lazard's work at Capita will examine a range of options to strengthen its balance sheet, including ‎the disposal of non-core businesses such as ParkingEye.

Sources close to the outsourcer pointed out on Friday that it had financial liquidity of more than £1bn, compared to the £29m of cash which Carillion had available when it went bust.

They added‎ that Mr Lewis was taking decisive steps to address Capita's £381m pension deficit, which is roughly one-third of the company's market capitalisation.

Capita declined to comment on Lazard's appointment.