Carillion in Liquidation

[Buspilot]

https://news.sky.com/story/stricken-hs2-contractor-carillion-in-urgent-fight-for-survival-11197537

Carillion, the troubled construction services group which is embedded in the HS2 high-speed rail link and other critical Government infrastructure projects, is racing to secure new funding within weeks to avoid collapse.

Sky News has learnt that Carillion, which has been sliding deeper into financial difficulty for months‎, is due to present a revised business plan to its syndicate of lenders in the coming days.


The plan, which has been drawn up by the company and its advisers over recent weeks, is said to have exposed‎ a funding gap running to hundreds of millions of pounds.

Carillion, which employs 19,500 people in Britain, has come up with a rescue plan which would involve handing back some loss-making contracts, revising the terms of others and potentially accepting financial support from the Government if it cannot secure it from private sector sources.

One insider said the company had been due to present the blueprint to lenders including Barclays, HSBC and Santander UK on or around 17 January but that that was now likely to be brought forward given the urgency of the situation.....

So another rail contractor in trouble. Where has all the money gone?

 

[LNW-GW Joint]

https://news.sky.com/story/stricken-hs2-contractor-carillion-in-urgent-fight-for-survival-11197537
So another rail contractor in trouble. Where has all the money gone?

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.

 

[route:oxford]

https://news.sky.com/story/stricken-hs2-contractor-carillion-in-urgent-fight-for-survival-11197537

So another rail contractor in trouble. Where has all the money gone?

It doesn't really matter *that* much.

All they do is assemble and orchestrate a group of sub-contractors. The knowledge based contractors won't drop dead if Carillion goes bust, the grunt sub-contractors may experience some debt-management issues, but they will still be around one way or another.

It's a sad fact of modern business. Often when you start digging around, they are nothing more substantial than a Bitcoin.

 

[hwl]

https://news.sky.com/story/stricken-hs2-contractor-carillion-in-urgent-fight-for-survival-11197537

So another rail contractor in trouble. Where has all the money gone?

UK: Some of the Healthcare /Education PPI projects have turned out to be rotten, 2 new hospital build delays and cost overrun and delays on the Aberdeen bypass
Canada: some big contract oops moments similar to the UK.
However the middle east is the real black hole with a £410m provision for 1 project going wrong (government contract and with lower oil prices they revised payment terms as they didn't have the money to pay Carillion effectively they aren't paying Carilllion.

and then there is the £710m pension blackhole...

 

[meolebrace]

Management error!

 

[PHILIPE]

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

 

[The Planner]

Why would it go up the wall, if they go pop someone else would just step in?

 

[hwl]

Why would it go up the wall, if they go pop someone else would just step in?

Hence one reason for the joint ventures on the HS2 (and many other big projects)...

 

[furnessvale]

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

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.

 

[HSTEd]

they are also responsible for the new halls of residence under construction for the University of Manchester.

In my capacity as Senior Student of my Hall of Residence I go to meetings with management - when I asked before Christmas if any contingency plans for their collapse had been made, all I got were cagey looks.

 

[73001]

Hence one reason for the joint ventures on the HS2 (and many other big projects)...

Exactly.... The HS2 stuff is a separate company from Carillion itself, Carillion Eiffege Kier, and the partners have agreed to guarantee any issues that arise from this situation.

 

[Bwlch y Groes]

Worth bearing in mind they also do work with a number of TOCs and are partnered with Abellio in the bidding process for the Wales and Borders franchise

 

[WatcherZero]

Being suggested as they run so much of the prisons service and other public contracts they are too big to fail and the government will step in if they are unable to secure fresh financing.

 

[Elecman]

I think that depends how much they’ve donated to the Tory party. IT didn’t save Jarvis who were heavily into Schools / University and medical PFIs. They just ensured that other companies picked up the contracts very quickly.

 

[BestWestern]

Worth bearing in mind they also do work with a number of TOCs and are partnered with Abellio in the bidding process for the Wales and Borders franchise

The thought of frontline railway staff working for an 'into everything' outfit like this lot; uggh. No thanks.

 

[aylesbury]

They most certainly have failed on their military contract ,saw it at our local RAF camp window don't open,rotten frames ,roofs leaking ,what a way to treat our lads and lasses.

 

[LNW-GW Joint]

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.
Well it's one way to boost union membership, I suppose.
Not sure the government would see it that way - contractors are just that, specialist contractors working on one-off projects, not permanent staff.

The general secretary of the RMT rail union, Mick Cash, said Carillion's workers were "not responsible for the crisis".
He added that workers "should have protection and guarantees from the government, including an assurance that operations will be directly transferred over to Network Rail with all jobs, pensions and rights safeguarded if Carillion goes bust".
"RMT has been through a similar situation to this with the collapse of both Metronet on London Underground and Jarvis on the railways.
"This is the high-risk gamble you take with handing infrastructure over to speculative private companies and the workers caught in the crossfire must be protected."

http://www.bbc.co.uk/news/business-42656879

 

[BestWestern]

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.
Well it's one way to boost union membership, I suppose.
Not sure the government would see it that way - contractors are just that, specialist contractors working on one-off projects, not permanent staff.

http://www.bbc.co.uk/news/business-42656879

I'd imagine the plethora of other contractors would ensure most of them will be re-employed pretty quickly? Any ongoing works would need to be completed by somebody.

 

[kilonewton]

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.
Well it's one way to boost union membership, I suppose.
Not sure the government would see it that way - contractors are just that, specialist contractors working on one-off projects, not permanent staff.

http://www.bbc.co.uk/news/business-42656879

How on earth would that work?
The “labour” force on the projects are in general mostly employed by subcontractors. The majority of direct staff are the management. How does the client / contractor relationship work if they’re all employed by Network Rail? If I worked for one or other party, I’d not be sure if I’d want to take a pay cut or have more generously renumerated colleagues on the other side of a Chinese wall.

 

[Olaf]

https://news.sky.com/story/stricken-hs2-contractor-carillion-in-urgent-fight-for-survival-11197537

So another rail contractor in trouble. Where has all the money gone?

It looks to have been under-estimating costs and to have not adequately digested the various take-overs and mergers of recent years.

The additional eyes running over it's books may well add to the concerns regarding the costings for HS2.

 

[Olaf]

Why would it go up the wall, if they go pop someone else would just step in?

But no doubt at additional cost, pus there will be fall-out ongoing for about three to five years as the business is picked apart.

 

[Olaf]

Hence one reason for the joint ventures on the HS2 (and many other big projects)...

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.

 

[pemma]

Why would it go up the wall, if they go pop someone else would just step in?

It creates a problem for partly started contracts. You'll have administrators and other companies spending ages looking at how much of the work was done and how much of it still needs to be done and nothing actually getting done in the mean time.

 

[Bookd]

For many years big construction companies have been overtradng, keeping their cash flow going by holding back payments to subcontractors; Carillion was formed by a merger of companies that had the same problem.
As a rather old ex-banker I was thought never to lend money to contractors unless fully secured, but that is now the way everything is done which is why there are regular failures.

 

[tomatwark]

The other issue is the contractors and suppliers who will go under because of this.

Any secured debt and the HMRC will always come first, and after the likes of PWC have had their cut the other creditors may get a few pence in the pound if they are lucky.

Companies that go bust they will need to be replaced in the supply chain as well and this will take time, there will no help coming from Westminster for them.

This will cause ripples through the construction industry for years to come.

 

[LNW-GW Joint]

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.

 

[14xxDave]

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.

 

[tomatwark]

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.

Never, the problem is most of the people teaching management courses did a management course themselves and have never been at the sharp end.

 

[AntoniC]

The other issue is the contractors and suppliers who will go under because of this.

Any secured debt and the HMRC will always come first, and after the likes of PWC have had their cut the other creditors may get a few pence in the pound if they are lucky.

Companies that go bust they will need to be replaced in the supply chain as well and this will take time, there will no help coming from Westminster for them.

This will cause ripples through the construction industry for years to come.

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.

 

[14xxDave]

Never, the problem is most of the people teaching management courses did a management course themselves and have never been at the sharp end.

Just don't ask me about so called new management.