Carillion knocked back over business plan as talks continue over future

Reuters

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.

The government, the Pensions Regulator and representatives from the firm held crunch talks to discuss the firm's options on Friday.

The Government is being urged to bring contracts from construction giant Carillion back into public control amid fears it could "collapse".

In a note to clients, Peel Hunt's analysts said: "We suspect that given its mounting liabilities, recent press comment, growing customer worries and supply chain hesitancy that Carillion will be forced (by the banks) to accelerate its financial restructuring". We urgently need to know just how exposed the Scottish Government and the public purse is if Carillion were to collapse.

Carillion, which has had to contend with a slowdown in many of its major markets, has seen its share price plummet from 230p a year ago to less than 15p on Friday.

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She called for an urgent task force, including employers and trade unions, to be set up to rescue Carillion's outsourcing contract and evaluate how the collapse of the company could impact on infrastructure projects, the public sector and the wider economy.

In addition to its rail operations, Carillion also manages almost 900 schools, provides services to the NHS and works with National Grid.

Notably, it holds a contract to build part of the forthcoming HS2 high speed railway line and is the second largest supplier of maintenance services to Network Rail.

He said it was a "pretty messy situation", adding: "The situation is pretty bleak".

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".

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Transport Scotland said that Carillion had "no intention of withdrawing" from the AWPR project, and that the consortium delivering the route "remains committed to completing it in accordance with the contract".

However, Carillion said it remained in constructive talks over securing additional short term financing and that longer term discussions were also continuing.

A spokeswoman 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".

The person familiar with the situation, who asked not to be named due to the sensitivity of the situation, said the government needed to get involved to help prop up the supplier.

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