Troubled Carillion lines up administrator amid rescue talks
Troubled Carillion lines up administrator amid rescue talks
The construction firm is seeking additional funding to avoid collapsing
13 January, 2018, 17:12
Ministers are drawing up plans to take over prisons contracts worth £200m from Carillion, .
Shares in Carillion crashed more than 28% to 14.2p following the news, with separate reports saying that the group had put accountancy giants EY and PwC on standby in the event of an administration.
In a statement, Carillion said: "Suggestions that Carillion's business plan has been rejected by stakeholders are incorrect".
"As part of its engagement with stakeholders, Carillion is in constructive dialogue in relation to additional short term financing while the longer term discussions are continuing".
Any agreement was likely to involve the raising of new capital and the conversion of existing debt to equity, which would result in "significant dilution to existing shareholders", it said in a statement.
The government, the Pensions Regulator and representatives from the firm held crunch talks to discuss the firm's options on Friday. It has also raised fears that taxpayers could be left with the cost of running some of the company's government contracts.
A collapse, financial strategists agree, could send shock waves through most sectors of the economy as well as the public service.
It also supports schools with health and safety and grounds maintenance.
A government spokeswoman said it has been monitoring the situation to ensure its "contingency plans are robust".
Shadow business secretary Rebecca Long-Bailey said: "The collapse of Carillion could provoke a serious crisis".
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Carillion employs very few construction workers on its new build developments, instead relying on sub-contractors and agency labour.
In addition to its rail operations, Carillion also manages almost 900 schools, provides services to the NHS and works with National Grid.
Carillion issued its first profit warning on July 10, 2017 when it warned it would need to make a huge GBP845.0 million provision against its contracts.
On Thursday, ministers overseeing everything from justice to transport, health and education met to discuss how they should respond to the possible demise of a company that plays a central role in British public life.
A Government spokeswoman said: "We are committed to maintaining a healthy supplier market and work closely with our key suppliers".
Carillion, which has had to contest with a slowdown in many of its major markets, has seen its share price plummet from 230p a year ago to less than 20p today.
The company has been working on a plan which it said "will provide the basis for the agreement of a proposal to restore Carillion's balance sheet".
A meeting with The Pensions Regulator is reportedly taking place on Friday to shore up the future of its pension scheme.
A Scottish Government spokesman added: "We continue to liaise with UK Government colleagues to monitor and mitigate service risks associated with Carillion's financial situation and stand ready to offer what assistance we can at this anxious time for the company's employees and their families".
"We will not comment further unless it becomes appropriate to do so".
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