Carillion disaster deepens after experiences building agency's lenders rejected rescue plan

Reuters

The future of troubled engineering company Carillion is being discussed at high-level government meetings this weekend, the BBC understands.

Carillion also declined to comment on the reports.

The Wolverhampton-based company is the UK's second largest in the construction sector and employs 43,000 people globally.

Carillion PLC (LON:CLLN) shares dropped by almost 30% in late afternoon trading on reports that its lenders have rejected the embattled construction firm's business plan, and that it has lined up an accountancy firm as a standby administrator.

Carillion added that it was in dialogue about securing short-term financing "while the longer-term discussions are continuing".

Carillion is holding crisis talks with United Kingdom government representatives on Friday, which Sky News said were aimed at safeguarding the more than 28,000 pension scheme members who face potential cuts to retirement payments should Carillion fail.

A business plan tabled by the group on Wednesday was reported to have been rejected by stakeholders because it failed to present a solid proposition for restructuring the business.

The schemes' trustees, The Pensions Regulator (TPR), the Pension Protection Fund (PPF), civil servants from the Cabinet Office, and city advisers are all set to meet today, Sky News reported.

Carillion also has major contracts to supply facilities management at 83 military sites in Scotland, as well as a 28-year contract managing the "elderly beds facility" at Glasgow's Queen Elizabeth University Hospital.

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A government spokesperson said: "We can confirm that a ministerial meeting took place yesterday, 11 January".

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".

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

Its only asset sale since the crisis erupted has been to offload a portfolio of healthcare contracts to rival outsourcer Serco for £50m - against a broader forecast for disposal proceeds of £300m.

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

The company is fighting net debts of more than £900 million, following a crisis sparked in July a year ago when it issued a 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 reported a first-half pre-tax loss of £1.15bn in September, while it announced just before Christmas that its lenders had agreed to defer a test of its borrowing agreements from 31 December to 30 April.

Labour frontbencher Jon Trickett said: "It has been clear for months that Carillion has been in difficulty but the Government has continued to hand over contracts to the company even after profits warnings were issued".

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