JARVIS, the road and rail engineer, is in last-ditch talks with investors to raise £100 million to prop up the group’s ailing construction arm.

The group needs the cash to complete its 14 Private Finance Initiative (PFI) construction projects, most of which are still being built.

Jarvis is seeking to raise the money from special purpose companies that have invested in the construction projects, which include fire stations in Tyne & Wear, schools, hospitals and university accommodation.

Equity investors in companies such as Barclays Private Equity and Smif, the infrastructure fund, will contribute part of the sum, as will lenders. Jarvis will also contribute some cash to finish the projects, but refused to say how much.

Alan Lovell, chief executive, said: “The idea is that it should all be done by Christmas and I’m pretty confident that we can pull it off.”

The refinancing of the PFI contracts is one of the key deals Mr Lovell needs to prevent the company going bankrupt this year. Another key deal is the sale of Jarvis’s one-third stake in the Tube Lines business.

Raising the £100 million will allow Jarvis to resolve its construction problems. The sum will first be used to complete four PFI projects that are 90 per cent complete.

Construction has stopped on Jarvis’s sites in recent weeks because of uncertainty over whether sub-contractors will be paid.

A further six projects are likely to be completed in the second quarter of next year. Four projects that are barely started will be sold to another contractor, most likely Vinci, the French construction group.

Jarvis, which has £250 million of debt, is also in talks to extend by one year an agreement with creditors. In July last year the creditors, led by Barclays and Royal Bank of Scotland, said that they would provide £25 million of additional banking facilities and waive loan covenants until March 2005.

Jarvis is also close to selling its Tube Lines operation for just over £100 million to Star Capital, an investor in the PFI secondary market that has bought assets from Abbey National and Babcock & Brown.

The sale will give Star Capital a one-third stake in the company, which has contracts worth about £4.4 billion to upgrade London’s Jubilee, Northern and Piccadilly lines. A disposal is the single biggest step Jarvis will take to pay off its debts, although the group has said that the money may be reinvested as working capital.

Jarvis’s European roads business is also expected to be sold for up to £30 million within two weeks.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax