Carillion Puts Administrators On Standby Should Talks Fail

Yolanda Curtis
January 13, 2018

News that Carillion had put administrators on standby and that rescue plans were in doubt sent its share price plunging to new depths yesterday.

As Sky News revealed last weekend, without support from the Government, Carillion's syndicate of banks will not provide up to £300m of new funding required from the end of the month.

Carillion is holding crisis talks with United Kingdom government representatives on Friday, which Sky News said were aimed at safeguarding the more than 28,000 pension scheme members who face potential cuts to retirement payments should Carillion fail.

The PPF, which would take on responsibility for paying pensions to thousands of current and former Carillion workers if it collapses, said: "The PPF is aware of the discussions between the company, Government and banks and, along with the Trustees and the Pensions Regulator, will act as it always does to protect the interests of Carillon scheme members and levy payers".

Senior ministers met on Thursday to discuss the future of construction giant Carillion, amid fears the struggling firm is approaching collapse.

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 Government, who despite warnings carried on with its programme of outsourcing public services to this company, must stand ready to bring these contracts back into public control, stabilise the situation and safeguard our public services".

"Handing Carillion bosses a blank cheque bail out is completely unacceptable - company bosses should not be rewarded for failure with public money", it said in a statement.

In October a year ago, Carillion agreed to some new credit facilities and managed to defer the repayment date for a portion of its existing debt, providing respite for shares, but that proved short-lived.

Vince Cable rejected suggestions the company should benefit from a Government bailout to avoid major public sector projects being plunged into chaos.

Carillion has a pension deficit is £587m, according to its annual accounts.

So far, numerous banks have indicated that they are reluctant to provide additional funding given the potential for huge losses on their existing exposure.

Shadow business secretary Rebecca Long-Bailey said: "The collapse of Carillion could provoke a serious crisis".

A number of disposals aimed at raising cash, including that of its Canadian operations, are progressing more slowly than originally anticipated.

The Wolverhampton-based company - a major supplier to the Government and named among the firms awarded deals for the building of phase one of the HS2 rail line - is meeting lenders to discuss options to reduce net debt, recapitalise and/or restructure the group's balance sheet. It has also raised fears that taxpayers could be left with the cost of running some of the company's government contracts.

The company has been pushed to the brink by cost overruns that forced it into a string of profit warnings past year and left it on course to breach the terms of its bank loans.

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

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Carillion and EY declined to comment.

Despite this, it reported a first-half pre-tax loss of £1.15bn for 2017 last 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.

Other reports by iNewsToday