Carillion collapses after UK government refuses bailout

Bloomberg

Carillion Plc, a UK construction company with government contracts in everything from hospitals to the HS2 high-speed rail project, filed for compulsory liquidation after failing in a last-ditch effort to shore up finances and get a government bailout.
The company employs 43,000 people worldwide, almost 20,000 of them in the UK, and has as much as $2.1 billion in outstanding borrowings. It held talks with the government to ask for the 300 million pounds it needed by the end of the month to stay afloat, the Mail reported.
Carillion’s board “concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect,” the company said. It’s obtained court approval for the move, Carillion said.
The challenge for liquidators and PM Theresa May’s government now will be to ensure that the company’s breakup is orderly, with contracts and staff moved to rivals. While Carillion’s spectacular fall has been gathering pace since July after a series of construction contracts soured, the political fallout gained momentum on Monday. The plan to wind up the company triggered criticism from the opposition, with Labour Party leader Jeremy Corbyn questioning the longstanding British policy of getting private-sector contractors to deliver public-sector projects.
“This is very worrying for a lot of groups,” Labour’s business spokeswoman, Rebecca Long-Bailey, told the BBC. “We expect the government to step up now and take these contracts back into government control. Where it’s possible to take those back in-house, it should do.”
She also questioned why the company had been awarded further government contracts despite issuing profit warnings.
David Lidington, the UK Cabinet Office minister, defended the government’s handling of the company. “We did decide that taxpayers cannot be expected to bail out a private business,” he told the BBC, adding that the deals that had got Carillion into trouble were overseas ones.
Lidington said that recent UK government services contracts had been structured in such a way that Carillion’s partners would now have to step in. For the rest, he said that “some services will be taken in-house, some services will go out to other contractors in a managed, orderly fashion.” “This is a very sad day for Carillion, for our colleagues, suppliers and customers,” Chairman Philip Green said. The Wolverhampton, central England-based company said it expected the receiver to request that PricewaterhouseCoopers be appointed special managers.
Carillion’s struggles posed a conundrum for May over the political cost of using public money to assist a private company, or allowing it to fail, putting public services and infrastructure projects nationwide in danger. The company has contracts with many wings of government, including building roads, managing housing for the armed services, and running facilities for schools and hospitals.
Carillion in 2017 issued three profit warnings in six months, causing its shares to plummet 93 percent, giving the company a market value of 61.1 million pounds. While its stock was suspended, shares in construction equipment-rental firm Speedy Hire Plc became its first victim, falling 12 percent due to its reliance on Carillion.