Tuesday, 23 January, 2018

Carillion could enter administration on Monday unless United Kingdom backs rescue

Media playback is unsupported on your device                  Media caption Bailing out Carillion'would send the wrong message, Vince Cable says Media playback is unsupported on your device Media caption Bailing out Carillion'would send the wrong message, Vince Cable says
Marlene Weaver | 14 January, 2018, 15:46

Shares in Carillion plunged nearly 30 percent to a new low on Friday after Sky News reported it had put administrators on standby, while a person familiar with the matter told Reuters that creditors did not like the plan put forward.

She said: "Carillion is a firm which has been awarded multi-million pound public contracts and if it was to fail, could cause a huge crisis".

The meeting comes as Carillion - a major government contractor on projects including High Speed 2 - races to secure additional funding to avoid collapse, with around 19,500 United Kingdom jobs at risk.

The move, Sky said, is part of a plan being undertaken by Carillion as it tries to secure approximately GBP300.0 million of emergency funding by the end of the month.

Government officials and regulators will hold crisis talks on Friday aimed at safeguarding pensioners' interests at Carillion, the vast construction group which is racing to avoid collapse.

"The thousands of workers with Carillion and those in the supply chain servicing its contracts across the public sector will be desperately anxious about the future and they too need to be reassured by the Scottish Government as a matter of urgency".

Carillion added that it was in dialogue about securing short-term financing "while the longer-term discussions are continuing". The builder, whose shares have plummeted after it issued three profit warnings in six months past year, employs about 43,000 people globally and gets three-quarters of its revenue from the UK.

A spokeswoman for Carillion said it met creditors on Wednesday but would not comment on reports of further talks. Carillion is not expected to send a company representative.

The talks took place 24 hours after a meeting of ministers from across a multitude of Whitehall departments to discuss contingency plans for its collapse.

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"Without that commitment of support from the government, administration is all but inevitable", the source said.

Reports that the company's proposed plan to turn around its fortunes has been rejected outright by stakeholders, which include three leading banks - Barclays, HSBC and Santander UK, have been played down.

If it survives in the short term, Carillion is also working on a plan to swap £1bn or more of its borrowings for new shares in the company, which is one of the Government's most important infrastructure delivery partners.

Such a plan would leave its pension scheme, or the Pension Protection Fund, as a big shareholder.

The company is fighting net debts of more than £900 million, following a crisis sparked in July a year ago when it issued a profit warning.

Since then, the company has cleared out its executive team, including chief executive Richard Howson and finance director Zafar Khan.

What does under-threat company Carillion do?

But Andrew Adonis, the former chair of the government's national infrastructure committee, said: "It looks as if Chris Grayling may have been bailing out Carillion as well as Virgin".

Carillion reported a first-half pre-tax loss of £1.15bn in September, while it announced just before Christmas that its lenders had agreed to defer a test of its borrowing agreements from 31 December to 30 April.

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