Carillion holds emergency talks with government amid fears of collapse

Ruben Hill
January 13, 2018

Carillion, which is involved in major infrastructure projects in Scotland and the rest of the United Kingdom, has debts of around £900 million and a pension deficit of £590m.

Last summer, Carillion took on two five-year MoD contracts worth £158m to provide facilities management services at more than 230 military sites across Scotland, the north of England and northern Ireland.

A spokeswoman said: "It is too early to predict the outcome of these discussions but Carillion expects that any such agreement is likely to involve the raising of new capital and the conversion of existing financial indebtedness to equity which would result in significant dilution to existing shareholders".

The government, the Pensions Regulator and representatives from the firm held crunch talks to discuss the firm's options on Friday.

Aside from its construction business the company has many outsourced public sector contracts in health, education, the prison service and local authorities. It employs 43,000 people globally.

It has been awarded contracts to build part of £56bn High Speed 2 railway, including the first phase of the line which will run between London and Birmingham and is scheduled to open in 2026.

The firm's troubles have prompted calls for the government to bring its contracts back into public control amid fears it could "collapse".

Carillion was forced to ask its banks, which include Santander UK, HSBC and Barclays, for support after breaching its loan agreements previous year when it issued a series of profit warnings.

Ministers have held crisis talks over a troubled company that hundreds of schools rely on for vital services, after questions were raised about its future.

Carillion is a major supplier to the Government and key contractor in the first phase of building the £56 billion HS2 rail line, but has seen its share price plunge almost 80% in the past six months after making a string of profit warnings and breaching its financial covenants.

The Guardian's website reported shadow business secretary, Rebecca Long-Bailey, as saying: "The collapse of Carillion could provoke a serious crisis".

According to the Press Association, Carillion's lenders - which include Barclays, HSBC and Santander - rejected the plan because it did not present enough of a restructuring plan for the business. "We are committed to maintaining a healthy supplier market and working closely with our key suppliers".

The FT reported that Cabinet Office minister David Lidington met more than 10 ministers on Wednesday including business secretary Greg Clark, transport minister Jo Johnson, and chief secretary to the Treasury Liz Truss.

The Pensions Regulator said it was not commenting on whether or not they were attending specific meetings, but a spokesman said: "We have been and remain closely involved in discussions with Carillion and the trustees of the pension schemes as this situation has unfolded".

A spokesman for the Scottish government said: "We continue to liaise with United Kingdom government colleagues to monitor and mitigate service risks associated with Carillion's financial situation".

"We will not comment further unless it becomes appropriate to do so".

Other reports by Click Lancashire

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