Carillion in Liquidation

[tomatwark]

I did not realise that has changed, at least one of the governments have finally got something right.

 

[Olaf]

Once again the mystic eye is pointed at management. It appears that nowadays we have a bunch of numpties drawing large salaries but without any real experience and knowledge. Doing a management course at the the local college does not make you a manager.

Dear god when will British Industry learn.

With a statement like that would you be one of those sort of Managers yourself by any chance?

 

[D365]

I see from the BBC that Mick Cash is calling for Carillion staff working on rail projects to be transferred to Network Rail, if Carillion fails.

Hmm, I've been looking at applying for Graduate roles at said companies. This is going to make choosing interesting...

 

[hwl]

Unfortunately it gets a little complicated if a partner gets into financial difficulty - specifically with regard to liquidity and solvency related clauses that would have implications for the JV not just the party that falls into difficulties.

This is a major issue for the UK cutting across numerous government departments.

The immediate problem has debt servicing costs at it's root; something I expect we will see hitting other rail business that have been making over optimistic assumptions in this area - including possibly two or three of the recent new franchises.

Interesting that once again Euler Hermes is involved - something like the fifth time it has been mentioned in connection with a business going under in the last month or so.

A JV at least usually gives time to sort out refinancing without everything collapsing in the mean time and also issues are usually reported earlier in a JV.

There is a reason Euler Hermes are the biggest credit insurers, they are very good at knowing when to call time

 

[hwl]

Losses in its "construction services" division in the UK and Canada.
My perception is that the rail business is not involved, though you never know how much cross-subsidisation is going on.
Although they won some HS2 work, the NR cutback on renewals and electrification can't help.
The irony is that Carillion bid for Balfour Beatty when BB were in trouble, and although the bid was rebuffed, they picked up several BB rail contracts.
Now the boot seems to be on the other foot.
Carillion are due to build (with others) the middle section of HS2 northwards from the Chiltern Tunnel portal.

And £0.5bn on a middle east contract.

 

[hwl]

The BBC are making much of the HS2 contracts, but Carillion is one of 3 CEK JV contractors working on 2 mid-section packages out of the 7 contracts let.
This is the stretch between the Chiltern and Long Itchington tunnel portals (which includes the East-West route crossing and connections).
So the exposure to Carillion alone is around 8% of the overall contract, and the other partners have said they will cover any Carillion default.
They are not involved in any of the tunnelling works which are the ones which start early, so it's by no means critical yet.

They are of course involved in existing electrification projects, notably the MML Bedford-Corby line and the EGIP Shotts route in Scotland.
These are joint ventures with SPL Powerlines of Austria.
They also have some role in the Manchester-Blackpool scheme, but they are not the only electrification contractors.

The BBC reports on the situation seem to be increasingly doom-laden.

The BBC are very late to the party, it has been looking bad for 18 months (if you read the FT) so the BBC are now running to catch up

 

[Olaf]

A JV at least usually gives time to sort out refinancing without everything collapsing in the mean time and also issues are usually reported earlier in a JV.

No, it is the other way around - it will collapse unless Carrillion is made financial sound.

There is a reason Euler Hermes are the biggest credit insurers, they are very good at knowing when to call time

They are the new boys on the block, and yes they will not be amateurs but the motivations are worth a closer look.

 

[fowler9]

They have also failed on their maintenance of accommodation of military personnel. Sub-standard work. I would n't mind seeing HS2 go up the wall, though

No they haven't, that is CarillionAmey which is a separate legal entity. They also haven't failed in their maintenance of accommodation of military personnel. It is much more complicated than that. I would love to hear about the substandard work by the way because it is done by lots of subcontractors also used throughout the country by other companies (ISS, Mitie etc).

 

[InOban]

Unfortunately it will be another case where the good are brought down by a mess they didn't create. In Scotland I think they have been in charge of the Shotts line Electrification, and as far as I am aware that is progressing without hiccups.

 

[OxtedSignaller]

Plenty of contractors waiting in the wings to take over. If they go into administration that’s when the competitors will start placing their bids. No one in their right mind would take them over as a going concern not with all their debt and liabilities.

 

[Olaf]

Plenty of contractors waiting in the wings to take over. If they go into administration that’s when the competitors will start placing their bids. No one in their right mind would take them over as a going concern not with all their debt and liabilities.

If the business goes into administration, unsecured creditors will be hit - that will include suppliers and other contractor firms with potential existential consequences to those parties.

There is also a time factor to be considered between the ball being dropped, and it being picked up again by whomever.

 

[92002]

Unfortunately it will be another case where the good are brought down by a mess they didn't create. In Scotland I think they have been in charge of the Shotts line Electrification, and as far as I am aware that is progressing without hiccups.

As it says in #26, both Shotts and Corby electrification are a Joint Venture with SPL Powerlines of Austria. So from a Carillion point of view an arms length arrangement. So the partner will probably finish the projects.

If they don't there are others waiting in the wings who can pick things up.

 

[northwichcat]

HMRC wont get paid first as they are no longer a preferential creditor, they have to take their chances with all of the other creditors.

Whether or not HMRC have priority over other creditors, they are the ones most likely to take a company to court if VAT or PAYE does unpaid for too long and if the court decides the company is insolvent they'll place it in to administration.

 

[AntoniC]

Whether or not HMRC have priority over other creditors, they are the ones most likely to take a company to court if VAT or PAYE does unpaid for too long and if the court decides the company is insolvent they'll place it in to administration.

That's right they Will.

 

[leightonbd]

That's right they Will.

Correct, but HMRC are not quick on the trigger in my experience,they will allow time for a solvent solution for as long as that seems a realistic option.

 

[meolebrace]

Well the contractors/suppliers I would hope, get paid direct by the banks/government rather than the middleman.

 

[furnessvale]

Well the contractors/suppliers I would hope, get paid direct by the banks/government rather than the middleman.

If the government start paying direct, the only guarantee is that they will pay more in the end.

There is a lot more to being a "middleman" than simply taking in the cash and deducting your slice!

 

[Bullfield WEst]

They even run the Delay Repay for Northern in Sheffield. Very badly in my experience.

 

[Merseysider]

They even run the Delay Repay for Northern in Sheffield. Very badly in my experience.

Yes, atrociously. My claims are dealt with an average of four months after submission. Completely inadequate.

 

[jon0844]

The BBC are very late to the party, it has been looking bad for 18 months (if you read the FT) so the BBC are now running to catch up

With the mention of HS2, I think the BBC saw a way of reporting to get the attention of those who will not necessarily have read the stories and just interpret it as being HS2 in jeopardy.

 

[Camden]

I wouldn't smile about that prospect. "IF" HS2 goes up the wall in those circumstances, a lot of taxpayers money would also have gone up the wall with nothing to show for it.

Which seems to the the sole thing keeping May from dumping it. The phrase "cut your losses while you can" springs to mind. If it resulted in a lot of people being permanently barred from holding public or private office ever again, I wouldn't say that it was all for nothing.

 

[Dai Corner]

Sky News have just tweeted that 'the board of Carillion says the company is taking steps to enter into compulsory liquidation with immediate effect'
https://twitter.com/skynewsbreak/status/952796220971474947

 

[SamYeager]

Now being reported by BBC & ITV. The political mudslinging has already begun with some labour person on BBC putting the boot in.

 

[Finfanero]

Just Confirmed:

Construction giant Carillion has gone into liquidation, threatening thousands of jobs.

The move came after talks between the firm, its lenders and the government failed to reach a deal to save the UK's second biggest construction company.

Carillion ran into trouble after losing money on big contracts and running up huge debts.

Its failure means the government will have to provide funding to maintain the public services run by Carillion.

http://www.bbc.co.uk/news/business-42687032

 

[theageofthetra]

Just Confirmed on

http://www.bbc.co.uk/news/business-42687032

Looks like you the taxpayer will be paying for that dividend they paid out in May as they were obviously so flushed.

Compulsory liquidation too which means the financials are truly horrific.

 

[gavin]

Looks like you the taxpayer will be paying for that dividend they paid out in May as they were obviously so flushed.

Compulsory liquidation too which means the financials are truly horrific.

Upto £900million in debt

 

[SamYeager]

According to the BBC the government will be funding Carillion's public sector activities such as meals & building maintenance so that they continue until further notice. Quite where rail related contracts stand is unclear.

 

[Peter Mugridge]

Upto £900million in debt

Bit more than that at their last annual report...

https://companycheck.co.uk/company/03782379/CARILLION-PLC/financials

Net worth -£968.2 million

They appear to have had a substantial negative net worth since at least 2010 - as far back as the chart goes - which means they've been heavily reliant on cash flow for a long while.

 

[Downthelane]

Now being reported by BBC & ITV. The political mudslinging has already begun with some labour person on BBC putting the boot in.

And what is wrong with that may I ask?

This is yet another Tory stitch up and as both Lib Dems and Labour have said:

"It is vital that shareholders and creditors are not allowed to walk away with the rewards from profitable contracts while the taxpayer bails out loss-making parts of the business."

I can't see anyone who uses this wonderful forum would ever chose to back the Tory party in this type of situation.

 

[LNW-GW Joint]

Mick Cash is waxing lyrical about protecting his members' jobs by transferring them to Network Rail.
Does anybody know what RMT membership there is in Carillion?
Would these be ex-BR staff who migrated to Carillion after privatisation?
I wouldn't have thought projects (electrification, HS2 etc) would be protected, but maintenance might be different.
I can't see TOC services (eg Delay Repay) being protected, as the contracts are let by the private sector TOC not the government.
The important thing is to find other contractors to take the rail business over.