Published: Sat, January 13, 2018
Business | By Max Garcia

United Kingdom government contractor reveals debt woes

United Kingdom government contractor reveals debt woes

In November, Carillion reported full-year profit will be "materially" lower than expected after it experienced a combination of delays to disposals of certain public-private partnership deals, and a "slippage" in the start of a "significant" project in the Middle East in addition to lower-than-expected margin improvements across a "small" number of United Kingdom support services contracts.

The British multinational has struggled since reporting half-year losses of £1.15bn.

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.

"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.

It said the firm remained in constructive dialogue about short term financing while "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.

It comes as the government, pension authorities and stakeholders meet on Friday in an attempt to thrash out a rescue package for the firm that would help it avoid collapse.

Carillion's large syndicate of lenders includes Barclays, HSBC and Santander UK, as well as a host of overseas firms. It employs 43,000 people globally.

The company added it was "focused" on "seeking to deliver an outcome that will ensure that the group emerges considerably strengthened and able to continue delivering excellent service to its many public and private sector customers".

Ministers from the Justice, Transport, Culture, Health, Education and Communities departments and ministries were also present, the Financial Times reported.

The Tate Modern commissioned six artists whose work is intricately linked to the urban environment and unveiled the giant street art
Image The company also built the Tate Modern

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

In addition to its rail operations, Carillion also manages almost 900 schools, provides services to the NHS and works with National Grid.

Unite union assistant general secretary Gail Cartmail, said: "The government must consider all options while the future of Carillion hangs in the balance, including bringing contracts back in-house".

However, no announcement has been made on a business plan to secure its future.

Carillion is a major supplier to the Government and has contracts in the rail industry, education and NHS.

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.

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.

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".

A spokesman for the Pension Regulator said: "We have been and remain closely involved in discussions with Carillion and the trustees of the pension schemes as this situation has unfolded".

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

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