Carillion - railway contractor / public services provider - financial concerns, 2017/18, now in liquidation

[whole diary]

[Chris from Nailsea]

A further update, from the BBC^» (British Broadcasting Corporation - home page):

Carillion: Banks call for government help

The troubled government contractor Carillion has held talks with its creditor banks this weekend and further meetings are planned for Monday, the BBC understands.

The construction firm owes £900m to RBS, Barclays, HSBC, Lloyds and Santander.  The banks may be able to show Carillion more leniency if the government is able to do its part, according to sources.

The firm's future is also being discussed by government officials.  Carillion is involved in major public projects such as the HS2^▸ (The next High Speed line(s)) high-speed rail line, as well as managing schools and prisons.

How exactly the banks want the government to intervene is unclear.  They could want the government to offer some guarantees in case Carillion cannot pay back its debts.  Or they may want the government to take some of Carillion's key projects back into the public sector.

The TUC has called on the government to "step in" to "guarantee jobs and services".  Deputy general secretary Paul Nowak said: "Tens of thousands of jobs are now at risk, along with vital public services and major infrastructure projects across the country."

New Tory party chairman Brandon Lewis told the BBC the government was keeping "a very close eye on this".  Mr Lewis told the BBC's Andrew Marr Show that the government was "making sure all plans and contingency plans are in place".  But he refused to be drawn on whether the government would bail Carillion out.  "It's a very commercially sensitive situation so I wouldn't comment further than to say I would hope to see that the working capital that they need will be there working with their partners," he said.

Labour peer Lord Adonis, who last month quit a head of the National Infrastructure Commisson, tweeted that the government has "got questions to answer about propping up Carillion with contracts long after its problems clear. Looks like another Grayling bailout!"

Last summer Transport Secretary Chris Grayling awarded Carillion part of the contract to build HS2, a week after the company had issued a profits warning and its chief executive had departed.

[stuving]

I've not heard anything so far about what the public service contracts contain as provisions for this eventuality, but it would be very odd indeed if they don't. After all, rail franchises do - including a Railway Administration Order as an option, and we've seen that happen to Railtrack.

In what is by now a standard part of the contract (Schedule 10 for GWR^▸ (Great Western Railway), SWR^» (South Western Railway - about), TSGN) there is a section called "Events of Default and Termination Events", and the list includes under "Insolvency" all the subspecies of that - Administration, Insolvency, Arrangements with Creditors, Stopping Business/Winding-Up, Railway Administration Order, or Security Enforceable (e.g. sequestration). As we saw, the government has the right to requisition the operation and keep it functioning, and it would be bizarre if that was seen as essential for the railways but not for any other privatised services.

What I can't see in the franchise agreement (contract) text (but of course it might be hiding somewhere in the roughly 600 pages of Eversheds' best verbiage) is any specification of how the business has to be structured to make that effective. I think the operation  has to be a self-contained subsidiary (unless, like Railtrack, it is a free-standing company with its own shareholders). However, it also needs to be operationally independent of the parent and all other group companies to ensure it can be detached in viable form.

Of course the contract is not the right place for a description of the HMG would do, as that's not an obligation on either side. But, as I said, there do seem to be some limited requirements on the contractor for "frangibility". As to the rest of the Carillion businesses, the PFI build contracts not yet delivered are a bit less urgent, and the commercial construction contracts can be dealt with in the usual way.

[ChrisB]

The banks need to take their losses if there is to be taxpayer inout, IMHI

[martyjon]

NOW IN LIQUIDATION

[LiskeardRich]

Entered liquidation this morning, reported to impact 20000 employees in the U.K.!

[grahame]

From The BBC^» (British Broadcasting Corporation - home page)

[Carillion] is the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence.

Think article should have said "was" rather than "is" ??

[LiskeardRich]

From The BBC^» (British Broadcasting Corporation - home page)

[Carillion] is the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence.

Think article should have said "was" rather than "is" ??

Has the liquidator stopped work, otherwise for the moment still is...

[LiskeardRich]

Is the Chairman, Philip Green the same Philip green who was at the helm of BHS? If so it raises more questions.

[stuving]

Is the Chairman, Philip Green the same Philip green who was at the helm of BHS? If so it raises more questions.

No.

[JayMac]

HMG at least did the right thing eventually, by doing nothing to prevent Carillion going bust.

Whether they should have continued awarding large contracts over the past year is questionable.

[didcotdean]

Although some took precautions. For example Oxfordshire CC decided to arrange an orderly wind-down and exit from contracts with Carillion in the middle of last year. There was only one left (for school meals and cleaning) which would have finished at the end of March if Carillion had lasted that long and preparations to take that in house were advanced. They have stated that there were no extra payments to do this, so I guess they used breakpoints or didn't take up options in the contracts where they weren't to come to a natural end.

[JayMac]

Somerset County Council won't now get any recompense for the poor workmanship and delays to the Inner Relief Road in Taunton.

SCC^‡(resolve) were suing Carillion. The road was opened 27 months late. Carillion also tapped SCC for an extra £3 million to complete the job after seemingly under-bidding for the contract. Although the road is open there is still outstanding work - drainage, surface dressing, pavements - that needs completing.

[ellendune]

Carillion also tapped SCC^‡(resolve) for an extra £3 million to complete the job after seemingly under-bidding for the contract. Although the road is open there is still outstanding work - drainage, surface dressing, pavements - that needs completing.

That was their style right back to when they were Tarmac Construction.  Everyone knew it in the industry. Find a loophole work out what it was  worth knock that off the tender price so they would win the work, then claim it back later!

[LiskeardRich]

Drainage seems an issue with most new roads, the Dobwalls bypass my local candidate has been redone several times to no success.

[SandTEngineer]

Well, companies come and companies go...  My concern is for all of the employees involved.  Must be a very worrying time for them all.  Been there in the past and I would never want to be there again...