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Some bond providers are warning firms will now find it much more difficult and costly to raise bonds as a result of the fallout.<\/p>\n
Surety capacity is being constrained as providers seek to manage risk, and brokers now warn that contractors with tight headroom on balance sheets could even be refused bonding.<\/p>\n
Henry Construction is believed to have had over \u00a3150m of bonds \u201clive\u201d at the time of entering administration, spread among 13 surety providers.<\/p>\n
The hit taken from the \u00a3400m revenue contractor\u2019s collapse is broadly equivalent to one year\u2019s premium throughput in the non-bank surety market.<\/p>\n
Chris Davies, managing director of broker DRS Bond Management, said: \u201cThe demise of Henry has bombed the market for probably a year to 18 months.<\/p>\n
\u201cIt was a once in 10-year event for a company of this size, but comes off the back of already high levels of corporate insolvency over the last 18 months.<\/p>\n
\u201cThe surety market has taken a big hit and now we are seeing bond capacity tightening appreciably. The next year or so is going to be difficult to say the least\u201d<\/p>\n
\u201d Everything will be scrutinised much more closely, particularly for bonds over \u00a31m or where expiry is beyond practical completion,\u201d he added.<\/p>\n
Bonding to net worth ratios, which determine the bonding ceiling for a contractor, have fallen from around 70% of the balance sheet worth, down to 40-50% per surety.<\/p>\n
Davies said that bonding over \u00a31m was now being spread across two or even three providers making it harder for contractors to secure.<\/p>\n<\/p><\/div>\n