Published: Sat, January 13, 2018
Money | By Armando Alvarado

United Kingdom government contractor reveals debt woes

United Kingdom government contractor reveals debt woes

This week alone, shares in the company plummeted around 22 per cent as investors awaited the outcome of crunch talks with lenders, and as reports surfaced that the Government had made contingency plans for the collapse of the firm.

Ministers reportedly discussed the contingency plans in place should Carillion collapse, news of which first emerged on Wednesday during Cabinet Office orals.

However, Carillion said it remained in constructive talks over securing additional short term financing and that longer term discussions were also continuing.

"Suggestions that Carillion's business plan has been rejected by stakeholders are incorrect", the company emphasised.

Sky News revealed last weekend that Carillion needs hundreds of millions of pounds within weeks to survive.

Unions warn that 19,500 British jobs are at risk if Carillion can't reach a deal with creditors.

Carillion has a pension deficit of roughly £580m, although this figure would be expected to rise sharply if measured according to the cost of insuring its various retirement schemes on a full buyout basis.

Meanwhile the union Unite is calling on the Government to consider all possible options including bringing contracts in-house, as doubts continue to grow over the future of troubled construction and outsourcing giant Carillion.

Their attitude is said to have prompted senior figures close to Carillion to discuss the possibility of emergency financial support from the Government.

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She said:"Carillion is a firm which has been awarded multimillion-pound public contracts and if it was to fail, could cause a huge crisis".

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.

Such a plan would leave its pension scheme, or the Pension Protection Fund, as a big shareholder.

Notably, it holds a contract to build part of the forthcoming HS2 high speed railway line and is the second largest supplier of maintenance services to Network Rail.

It is also engaged in building the Aberdeen Bypass and was responsible for constructing the Tate Modern art gallery in London and the Channel Tunnel. In response, Carillion cut its generous dividend and its long-standing Chief Executive Officer Richard Howson - in the post since 2012 - resigned.

Earlier in January, Carillion also discovered it was under scrutiny from the UK Financial Conduct Authority regarding "timeliness and content" of it financial statements leading up to its July 2017 profit warning.

Carillion's fight for survival is being led by interim boss and industry veteran Keith Cochrane, a former CEO of engineer Weir Group.

Carillion declined to comment on Sky News' report. In September, "disappointing" half-year results saw Carillion sink to a pretax loss of GBP1.15 billion from a profit of GBP84 million the year prior amid further impairments.

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