An After-hours RNS was issued yesterday evening, 6.08pm in the UK with the following update from the company.
Update on Recapitalisation and Restructuring Discussions
Carillion plc (“Carillion” or the “Group”) met with representatives of its creditor groups to present its business plan on 10 January 2018. Further to this presentation, Carillion continues to engage in constructive discussions with a range of financial and other stakeholders regarding options to reduce debt and strengthen the Group’s balance sheet.
Suggestions that Carillion’s business plan has been rejected by stakeholders are incorrect. 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.
The Board remains focused on seeking to deliver an outcome that will ensure that the Group emerges considerably strengthened and able to continue delivering excellent service to its many public and private sector customers.
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The “too big to fail” theory asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system and that they therefore must be supported by government when they face potential failure.
wikipedia.org/wiki/Too_big_to_fail
Carillion PLC group was demerged for Tarmac in the late 1990s – is a major supplier to the government with large contracts across various services education, the NHS, prison serves and the rail industry which including HS2 future contract.
The share priced plunged yesterday on reports lenders have rejected its debt restructuring plan. Carillion’s lenders – which include Barclays, Santander, Lloyds Banking Group, Royal Bank of Scotland and HSBC – rejected the plan because it did not present enough of a restructuring plan for the business.
Now we see the bank’s urge the UK government to step in to save Carillion. Will Downing Street intervene, does this prove that some larger UK companies have now become too big to fail? With some of the banks calling on the government to step in, seeking a taxpayer guarantee for the company’s debt, remind you of 2007/8.
The government is reliant on the contractor for a wide range of services and has left its self-vulnerable, now the government is being urged to bring the company into public control amid fears the construction company could collapse. With a £600m pension deficit, plus at least £900m in debts, some quoting estimates of the mounting debt to be closer £1.1bn, does the government have any other option?
The Wolverhampton-based group employs 43,000 people worldwide including 19,000 in the UK, shares fell sharply to 14.2p, hitting a low 0f 12.5p at one point yesterday, taking its drop since a July profits warning to 93%. Now, this is hard to swallow for creditors and investors alike when the share price was sitting around 236p in January 2017.
With three profit warning over the past year, eye-watering amount of money disappearing out the door. FCA investigation financial statements Carillion issued in the run-up to last July’s profit warning. A question that should be asked “why did ministers continue to sign off major contracts under these circumstances”
Conclusion
Someone has to clean this mess up, too many people job’s, pensions depend out on the outcome. British public service infrastructure will be severely affected if politicians fail to agree on a restructuring plan.
I am sure Labour will see this as an opportunity to bring the company back into public hands, the banks will not want to this to fail for obvious reasons.
One stand out the warning for me, have lessons not been learned from the man-made banking crisis of 2007/8, too few are held accountable. l think we have not heard the last of why faceless government ministers continue to sign off major contracts for Carillion knowing of the dia financial position.
Myself personally, a public inquiry should be held and those involved in this fiasco should be held accountable, after all, it may be the British taxpayer who will once again bail out these bureaucrats.
