Govt holds emergency Carillion debt talks

By Paul Norman - Friday, January 12, 2018 9:02

The government has confirmed it will meet heavily indebted group Carillion and the Pensions Regulator on Friday to discuss its deficit as all parties seek to ward off a failure that would have major implications for the UK’s construction and development sector.

Carillion, which is the UK’s second largest construction group with 43,000 staff globally, has £1.5bn of debt and a pension shortfall of £587m while the recent 90% share price collapse saw its market capitalisation sink to £100m.

The company held talks with its lenders including HSBC, Barclays and Royal Bank of Scotland and advisers in London on Wednesday but they are now taking time to consider options and no announcement has been made on a business plan to secure its future.

Carilliona has notable government contracts including to build part of the £56bn High Speed 2 railway, including the first phase of the line.

The Financial Times reported last night that ministers from across a number of departments met on Thursday in an emergency meeting to discuss Carillion's financial problems.

A spokeswoman for the government said: "Carillion is a major supplier to the government with a number of long-term contracts. We are committed to maintaining a healthy supplier market and work closely with our key suppliers," she said.

"The company has kept us informed of the steps it is taking to restructure the business. We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress."

The company issued three profit warnings in five months last year after writing down more than £1bn from the value of contracts.

Last week it also merged that Carillion was being investigated by the Financial Conduct Authority over the “timeliness and content of announcements” made by the company between 7 December 2016 and 10 July 2017.

Any refinancing is expected to involve its lenders swapping their debt for Carillion shares. As part of the package, its pension fund or the pension protection fund would likely be a major shareholder.

It has been reported that if talks with lenders collapse Carillion may seek emergency financial support from the government in the form of an emergency loan, a repricing of some deals or the company handing back loss-making contracts.

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