Crisis deepens as lenders reject rescue proposal
19,500 jobs at risk as construction giant struggles with £900m of debt
The crisis at Carillion looks set to deepen after it emerged that lenders to the construction giant effectively rejected a rescue plan proposed by the debt-laden group.
The Press Association understands that a business plan tabled by the group on Wednesday was knocked back because it failed to present a solid proposition for restructuring the business.
Sources also suggested that the proposal’s methodology was found wanting, but talks were ongoing.
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.
It comes as the Government, pension authorities and stakeholders met yesterday in an attempt to thrash out a rescue package for the firm which would help it avoid collapse.
Carillion, which is struggling under £900 million of debt and a £590m pension deficit, denied the business plan had been rejected by stakeholders, but added that a restructuring could result in a debt for equity swap.
In a statement, the company said: “It is too early to predict the outcome of these discussions but Carillion expects that any such agreement is likely to involve the raising of new capital and the conversion of existing financial indebtedness to equity which would result in significant dilution to existing shareholders.
“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.”
Unions have also urged the Government to step in to protect 19,500 jobs that are now at risk.
Shadow business secretary Rebecca Long-Bailey said: “The collapse of Carillion could provoke a serious crisis.
“It would have major implications for the outsourced government contracts the company holds, as well as the firm’s thousands of workers, those in the supply chain and those who rely on Carillion’s pension fund.”
A Government spokeswoman said: “As Carillion is a major supplier to Government it should come as no surprise that we are carefully monitoring the situation while working to ensure our contingency plans are robust.
“We are committed to maintaining a healthy supplier market and work closely with our key suppliers. The company has kept us informed of the steps it is taking to restructure the business.”
Carillion is a major supplier to the government and a key contractor in national projects.