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Carillion crisis deepens after reports construction firm's lenders rejected rescue plan

13 January 2018

Carillion issued its first profit warning on July 10, 2017 when it warned it would need to make a huge GBP845.0 million provision against its contracts.

The Wolverhampton-based company - a major supplier to the Government and named among the firms awarded deals for the building of phase one of the HS2 rail line - is meeting lenders to discuss options to reduce net debt, recapitalise and/or restructure the group's balance sheet.

Government officials and regulators will be holding crisis talks today aimed at safeguarding the interests of more than 28,000 pension scheme members who could face cuts to retirement payments if Carillion does not survive.

The government confirmed ministers met yesterday to discuss Carillion's future and were "monitoring the situation closely".

A spokeswoman for the government declined to comment on any specific meetings.

However, it now has debt and liabilities including provisions, pensions and accounts payable of as much as 1.5 billion pounds, according to analysts, compared with a market value of just 68 million pounds on Friday. "We are committed to maintaining a healthy supplier market and work closely with our key suppliers", she said.

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"The company has kept us informed of the steps it is taking to restructure the business".

"We will not comment further unless it becomes appropriate to do so".

Carillion was unavailable for comment.

The rescue plan shown to lenders on Wednesday includes handing back some loss-making contracts, revising the terms of others and potentially accepting financial support from the Government if it can not secure it from private sector sources.

The company employs more than 20,000 workers and there are many more workers reliant on the company's future in its supply chains.

The company provides services to government departments including justice, health and education, and has built hospitals, roads and rail lines.

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Any collapse would be felt across Britain and also in Canada and the Middle East where it has worked on landmark projects.

Earlier this week, Carillion presented a revised business plan to scores of lenders - but contrary to reports, this was not expected to produce an instant agreement with them. This should include the possibility of bringing contracts back in-house.

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.

Unite received assurances from Carillion after the company's share price plunge last November and was assured there was nothing to be concerned about.

The move is part of contingency planning being undertaken by Carillion as it races to secure approximately £300m of emergency funding by the end of the month.

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Carillion crisis deepens after reports construction firm's lenders rejected rescue plan