Carillion plunges again as company fights for survival

LONDON (Reuters) – British infrastructure group Carillion (CLLN.L) was teetering on the brink on Friday after its creditors failed to agree a rescue deal, while the government held crisis meetings over the fate of the major provider of public services.

FILE PHOTO: A Carillion sign in Manchester, Britain July 13, 2017. REUTERS/Phil Noble/File Photo

One person familiar with the situation said creditors did not like the rescue plan put forward by the construction and services group, while Sky News said the company had put administrators on standby in case it collapsed.

Carillion shares closed down 29 percent after hitting a record low of 12.5 pence.

Sky said the 200-year-old company had lined up EY to help manage the business if it failed to strike a deal with creditors. Sky did not say where it obtained the information. Carillion and EY declined to comment.

Tensions around the debt-laden company have been ratcheting up for weeks and 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 business that plays a central role in British public life.

“Ministers did meet yesterday, there are ongoing meetings,” a spokesman for Prime Minister Theresa May said. “We are monitoring this situation closely and will continue to do so.”

One of many private companies to run public services in Britain, Carillion is fighting to survive after costly contract delays and a downturn in new business prompted a string of profit warnings and a first-half loss of more than 1 billion pounds ($1.4 billion).

Shares in Carillion closed around 14 pence, compared with a price of 240 pence a year ago. Its market value of 64 million pounds compares with debt and liabilities of 1.5 billion pounds, according to analysts.

Any collapse would be felt across Britain and also in Canada and the Middle East where it has worked on landmark projects.

Employing 43,000 people, it provides services to government departments including justice, health and education, and has built hospitals, roads and rail lines.

GOVERNMENT SUPPORT?

Spun out of Tarmac nearly 20 years ago and having bought Alfred McAlpine in 2008, Carillion has worked on key construction projects including London’s Royal Opera House, the Suez Canal road tunnel and Toronto’s Union Station.

In July last year it won contracts to build Britain’s new High Speed 2 rail line, a key project that will better connect London with the north of England.

The GMB trade union called on the government to protect Carillion’s workers and pensioners, but said the company should not be bailed out.

“Handing Carillion bosses a blank check bail out is completely unacceptable – company bosses should not be rewarded for failure with public money,” it said in a statement.

The company met with creditors including RBS and Santander UK on Wednesday to ask them to consider a debt extension or roll-over in financing talks and it was expected to talk with the Pension Regulator on Friday.

Its pension deficit stands at around 580 million pounds.

The person familiar with the situation, who asked not to be named due to the sensitivity of the situation, said the government needed to get involved to help prop up the supplier. The Financial Times said the creditors rejected the deal.

Many of Britain’s service providers have been hit in recent years after they took on work during the financial crisis at low prices for long-running, fixed-price contracts to keep work coming in.

The contracts left little room for delay or failure and have led to problems for groups including Capita, Mitie and Interserve.

Carillion’s fight for survival is being led by interim boss and industry veteran Keith Cochrane, a former CEO of engineer Weir Group. New CEO Andrew Davies, head of family-owned builder Wates Group and formerly with defense company BAE Systems, joins on Jan. 22.

Additional reporting by David Milliken; Lawrence White; Editing by Paul Sandle and Mark Potter

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