(Reuters) - Kier Group <KIE.L> said on Thursday investors snapped up only 38 percent of the new shares the British builder issued as part of a fundraising, as shareholders likely avoided a construction sector shaken by the collapse of Carillion <CLLN.L>.
Kier last month announced a surprise plan to tap the market for some 264 million pounds in a heavily discounted share sale, blaming the reluctance of banks to lend to the construction sector.
The company said its joint bookrunners will look to sell the remaining 40.2 million new shares not validly taken up, and have agreed to buy the shares themselves if they are not sold by 1700 GMT on Friday.
Shares in Kier are expected to fall as much as 20 percent on Thursday, according to a premarket indicator.
Kier, which builds and maintains highways, railway tunnels and houses, expects to receive net cash proceeds of 250 million pounds by end-December and its Chief Executive Haydn Mursell on Thursday appeared to calm investors jittery after the near bankruptcy of rival firm Interserve <IRV.L>.
"Following the completion of the 250 million pounds rights issue, Kier enters 2019 with a strong balance sheet which puts us in an excellent competitive position," Mursell said in a statement.
Rothschild is Kier's financial adviser on the share issue, which has been fully underwritten by Numis Securities, Peel Hunt, Citigroup, HSBC and Banco Santander, all of which are joint bookrunners.
(Reporting by Arathy S Nair and Noor Zainab Hussain in Bengaluru; Editing by Sai Sachin Ravikumar)