Carillion in compulsory liquidation
The UK’s second-biggest Construction giant Carillion has filed for compulsory liquidation, shouldering a £1.5 billion debt pile, as they failed to secure funding to keep operating
The government will be providing the funding required by the liquidator to maintain the public services carried on by Carillion staff, subcontractors, and suppliers the company said.
Carillion, who won several public sector contracts in the UK employs 43, 000 people, 19, 500 of them in Britain, held meetings with the government after the bankers refused to provide £300m in new funding without direct intervention from Whitehall.
PwC is expected to be appointed by the courts to act on behalf of the official receiver and liquidate Carillion’s assets.
Philip Green, Chairman of Carillion said: “ This is a very sad day for Carillion. Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future. In recent days, however, we have been unable to secure the funding to support our business plan and is therefore with the deepest regret that we have arrived at this decision. We understand the HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors, and suppliers.”
Carillion has a pension deficit of £587m and net debts of £900m as its stock market valuation last week of less than £100m after a 90 per cent fall in share price during 2017. The crisis at Carillion accelerated last year after the Wolverhampton-based company warned it was losing cash on key contracts, the debt was rising and it would have to write off £800m and suspend its dividend, leading to the departure of former chief executive Richard Howson. The government will face questions in the House of Commons about why it continued to give the group major contracts – including the £1.4bn HS2 deal even after its first profit warning in July 2017.
Firms working for failed construction giant Carillion in private sector deals will only have two days of government support, Cabinet Office Minister David Lidington has warned. Carillion spent £952m with local suppliers in 2016 and used an extensive network of small firms, who are now waiting to learn if the will be paid.
The move would “give time for private sector counterparties to Carillion, to decide whether they want to accept termination of those contracts, or themselves to pay for the ongoing costs”.
The government told Carillion’s staff working on public sector contracts they would continue to be paid under the terms of the deal agreed with the government’s Insolvency Service. Carillion, which managed hundreds of vital public services.
Questions will be asked about corporate governance. The company’s pay policy was changed in2016 to make it harder to demand repayment of executive bonuses if the company went bust.
Former CEO Richard Howson from 2012 until July 2017, had £1.5m in pay and perks in 2016. Carillion is continuing to pay is £ 660,000 salary and £28, 000 benefits until October. Mr. Lidington told the Commons the official receiver had the power to impose penalties if it uncovered any misconduct or irregularities.
Carillion, which managed vital public services, including maintaining of 50,000 homes for military personnel, provided 218 school meal services, maintained 50 prisons, provided11, 500 inpatient hospital beds, and also had a £1.4bn joint venture contract for HS2, collapsed into liquidation on 15th January 2018, in one of the most dramatic corporate failures of recent years.