[Closed] Carillion

Uncle Vince clear this morning. Let the shareholders and creditors take the hit. Will be interesting to see what our supposedly extreme government ends up doing.

Fully with Mr Cable on this one.

Yep, Mr Cable made it clear (as he often seems to)

It's rubbish for the workers who will be impacted if it closes but I agree that it shouldn't be propped up by the state.

The money should be spent on helping the staff get into other jobs quickly.

Let the shareholders and creditors take the hit.

Indeed. I'd support efforts to protect the jobs and maintain delivery of services, but only if creditors and shareholders don't benefit. Obviously the banks want the govt to to bail them out, not Carillion. Hardly a surprise given their history.

Agree - Vince Cable has it spot on.

Don’t disagree with lettering shareholders take the hit - that’s part of the risk they take. Employees is a different matter - whoever takes the work should follow TUPE as if it was a contract demobilisation/mobilisation IMHO.

the making of a crisis that could have far reaching consequences

I knew that things went downhill for them after Kayleigh, but I hadn’t realised they had got this bad.

I have never, EVER had to deal with a worse company than Carillion. They manage military housing and have an absolutely shocking reputation across the board. Personally, I'm fighting (yet again) for refunds due from their poor administration. Currrently they owe me over £500 for having overcharged me that amount in December for my accommodation yet are refusing to give back my money until the end of the month. I have had to fight them constantly for the last 2 years. Bastards.

It's harsh for the workers but public money shouldn't be used to prop up an absolute shambles of an organisation.

In all seriousness, bailing out/nationalisation might be a good solution if it allowed Govt to then terminate the PFI deals.

while the Cabinet Office on Friday hosted emergency talks with the Pensions Regulator about the company’s 28,000-member [b][u]pension scheme, which has a £580m deficit[/u][/b]

There would have to be some kind of bailout if we want PFI hospitals and schools to keep running.

The pension deficit is a legacy of umpteen mergers, poor investment returns and prior legislation that allowed companies to go on 'holiday' from paying their contribution into pension schemes. Successive mal-administration by Governments has meant that the shares of many infrastructure companies are considered 'junk' by investors - who would want to put you money into contracts with single digit returns? Whilst the shareholders will take the hit, who will take on basket cases like the MOD housing contract? The Government is going to have to shake their magic money tree pretty hard to attract other bidders for contracts, so in the mean time the maintenace of public facilities like hospitals, schools will get worse. I'm due to go to a dinner this week sponsored by Carillion, guess I'll be going hungry?

I have had dealings with several companies who’ve had Carillion as clients. They’ve all gone through the same problem of late payments, invoices disputed and eventually taking legal action against them only to come out of it making a loss. Two companies didn’t survive their dealings with them all the others struggled to get through.
About time the tables where turned on Carillion and see if they survive without a bailout.

On a individual level its going to be hard for some folk, but most of the work will still have to be done....

On a corporate level * em, biggest bag of * I've ever come across.

I knew that things went downhill for them after Kayleigh, but I hadn’t realised they had got this bad.

I'm nervous on this one. Their rail division (certainly the team based near Paddington) are good, very good. It Carillion go into administration I wonder what impact it will have on infrastructure schemes I.e. crossrail where key deliveries approach and there are interdependent milestones.

A lot of the actual construction work they are involved with is actually done by subcontractors. They could carry on with a different company. The whole sector seems to be riddled with these rubbish management companies abusing the subbies and supply chain to make a profit. They are certainly not too big to fail.

I’m not sure how the Shareholders are supposed to take the hit as Vince suggests? Surely if the company goes into admin, they’ll have lost all their money anyway! What am I missing?

why don't they see if they can raise funding from their wealthy directors and shareholders....oh wait a minute who would be stupid enough to put their own money in

There would have to be some kind of bailout if we want PFI hospitals and schools to keep running.

This doesn't follow at all, leases will continue to exist if they go bust and it should be possible to still service them as the people haven't disappeared.

What am I missing

no more bunga bunga parties for them and their mates at westminster

The whole sector seems to be riddled with these rubbish management companies abusing the subbies and supply chain to make a profit.

It’s not just Carillion, the majority of ‘big builders’ Kier, Balfour, Bovis, Wates are management companies and sub every aspect. They sub every aspect they can from the security cabin as they arrive on site, to the final clean as they leave.
Screwing subbys is the norm and par for the course, they work to such low margins that not paying applications and valuing works done low, appears to be a bonified business method.

Mefty +1

It’s likely Carillion have sold most of the equity that they had in any PFI deal, most likely that what remains are the hard and soft FM contracts, the administrators would self off various divisions as going concerns.... so the impact on Jo public will be minimal.

The employees are likely to suffer from reduced pensions + loss of any share save schemes.

The construction projects are likely to be more significantly impacted, should the construction divisions fail to find buyers the the projects concerned will be blighted by having to change main contractor.

teamhurtmore - Member
Uncle Vince clear this morning. Let the shareholders and creditors take the hit. Will be interesting to see what our supposedly extreme government ends up doing.

Mucho supporto of this’o..

Over bloated over charging company. Know several people who have worked for them and the staffing levels from what they say are just ridiculous. One quick example, 14 men to oversee/witness/record/carry out some earth testing on a small transformer base a mate engineered on. Just a joke!

This doesn't follow at all, leases will continue to exist if they go bust and it should be possible to still service them as the people haven't disappeared.

POSTED 2 HOURS AGO # REPORT-POST

Let em go bump, their contracts will be swallowed up by their competitors, employees will TUPE across and work will still get done. A few board members and middle management will suffer, as will the shareholders, but that’s the risk, the average bloke won’t notice a jot of difference.

Was listening to this earlier.

They said something like £900 million debts and £600 million in pension deficit.

+1 for agreeing with VC, I bet the shareholders have been soaking up the dividends over the years and they just voted to not help out fully expecting the government to step in I bet and VC has just called their bluff. Lets see what they do now the shares they have tanked over the last year (-90%!!!!)

Government needs to rescue it's projects it has with them and protect the country from them. Then lets see what happens and obviously make sure the workers are looked after first (yeah right!!!!).

I am guessing they are going to freeze the shares and they should freeze all the assets of the board. I bet they have nice fat bank accounts and nice second homes abroad.

There's a lot of fairly tedious schadenfreude on this thread. A sad demise of a once proud Wolverhampton company.

I'm sure they'll do it out of the goodness of their hearts.

Of course they will need to be paid, but the obligation to make payments to Carillion will disappear, all these structures were designed to survive the bankruptcy of the sponsor as banks don't like having risk on contractors.

That should have read banks/users not just banks.

Private sector efficiency my Aunt Fanny. I hope Jam is reading this.

I reckon the government should bail them out - by buying the lot. They did it with Network Rail and Lloyds, why not this time? Renationalise.

free market capitalism = Privatizing profits and socializing losses

course they will need to be paid, but the obligation to make payments to Carillion will disappear, all these structures were designed to survive the bankruptcy of the sponsor as banks don't like having risk on contractors.

Chap i was talking to last week had bought a carillion van at auction, he said he had loads of problems with it, cost him a lot for repairs, maybe repairs and maintenance to their fleet is not a high priority.

Over the water in Liverpool we have a huge white elephant being built late by carilion, loads of problems reported so far and a cost of 365 million

free market capitalism = Privatizing profits and socializing losses

Nah, free market capitalism = Letting it fail, and letting everyone whose pension schemes are invested in shares lose their money

Same thing, different words.

So if its allowed to go bust, huge redundancy payments from the state,to the workers employed , self employed get nothing, huge pension top up from the state,high unemployment for a while, services fail,as no staff to fix them, then new companies pick and choose which contracts they want adding on a premium,smaller subies go to the wall, new companies dont take on all the displaced staff, its a huge circle or bubble about to burst or become a whole circle.

That's why the Govt needs to buy it out.

That’s why the Govt need to stand clear of it and let it fail, pull in the shareholders and strip assets.

Then get someone else to pick up the contracts and actually deliver the projects instead of laundering money into a system that’s seriously flawed.

Got no problem with the govt taking it over as long as the banks and shareholders get nothing. That won’t happen though will it. The shareholders will be screwed but the banks will get their loans back.

letting everyone whose pension schemes are invested in shares lose their money

The argument that the shareholders of 'too large to fail' banks and other companies are pension funds, and that by implication it is ordinary people who will suffer if the companies are not bailed out by public money, is ultimately specious. Investment entails both potential risk and reward, and the job of pension fund managers is to manage the risk by ensuring that their funds are not excessively exposed to any one company or sector. Even more importantly, it is their responsibility as owners/shareholders to exercise supervision, influence and control over the boards of companies like Carillion, to ensure that the companies themselves are well run. Pension funds need to take a much more pro-active role in the monitoring of the businesses in which they have a stake (to do which, I suspect they need to employ a much higher calibre of people, i.e. individuals with as good an understanding of the businesses and markets as the companies in which they have shares).

The lying Tories did sweet fanny bugger all when Tata Steel in Redcar shut down, no help whatsoever.. not even a visit by your “friendly, call me Dave” no correspondence in the slightest.

They all sat perving porn on their MPs computers and sending interns out to collect vibrators, standing up in front of the public and spewing out lies. And appeasing and supporting racism, and subsequently covering themselves in a thin veil of deceit.

The government should stay clear of anything important, clearly incompetent rudderless backbone missing self serving brown nose each other Burlington club kick a homeless person whilst they’re down types.

SCS are offering nothing to pay till 2018 then 4 years interest free.

Problem solved.

Oh and 3 words: "High" "Speed" "Two"

Next EDF will go bust and send Hinkley belly up.

Despite the headlines professing Armageddon the reality will be a damp squib. If Carillion fail it will just be like the collapse of Jarvis

The folks who are likely to be out of pocket are employees who are let go and anyone left with a part finished construction projects (excluding the PFIs)

The lying Tories did sweet fanny bugger all when Tata Steel in Redcar shut down, no help whatsoever.. not even a visit by your “friendly, call me Dave” no correspondence in the slightest.

They all sat perving porn on their MPs computers and sending interns out to collect vibrators, standing up in front of the public and spewing out lies. And appeasing and supporting racism, and subsequently covering themselves in a thin veil of deceit.

The government should stay clear of anything important, clearly incompetent rudderless backbone missing self serving brown nose each other Burlington club kick a homeless person whilst they’re down types.

u OK hun ?

Black listing MoFo’s!

Can anyone please explain what it means to an employee if the company has a pension deficit and how you can find out if your own company has one also?

Edit: Am I right in thinking this applies to defined benefit pensions and not defined contribution pensions?

A pension deficit should equal jail time for the directors.

It's stolen employees money.

Have worked fot them 4 times ad s contractor - in fm, building services, defence & rail.
Lots of good people.
Centrally determined and implemented policies; too little consideration of the implications.
Extended payment terms for subbies.
Aggressive bidding in competitive tenders.
Poor risk management - including inadequate risk pots.
Some bad luck - bad debts in middle east.
Poor planning on 3 major pfi jobs.
Opaque finances.
What could possibly go wrong?
Carillion made an opportunistic bid for Balfour when they were struggling.
Carillion have won no friends by their behaviour.
Competitors are waiting for the right time - and an even more competitive take-out price.
Sad, really when they could have done so much more and better.

Can anyone please explain what it means to an employee if the company has a pension deficit and how you can find out if your own company has one also?

Its a snapshot but indicates, if the company sponsor goes bust, there is a risk than there will be insufficient funds to pay all its accrued pensions. There is a government protection scheme, which is explained [url= https://www.ft.com/content/029031ee-e246-11e6-8405-9e5580d6e5fb ]here[/url]. There will be a note in the company's accounts (normally towards the end) which will outline the present position including sensitivities on changes in assumptions. Only DB schemes.

Well some here have been busy on BBC, Sky New and the random papers. I have been involved in Carillion for a long time, work directly in the industry and know what they are doing to resolve this.

1. Shareholders have already taken a colossal hit on this, the net value fell from over £1bn to £85m in a matter of a few weeks back in August/September, private investors and pension funds lost 92% (based on Fridays closing price of 14p). Vince cable is going for political points but is way off the mark. Carillion have a rescue package and it now involves a debt for equity swap. Put simply this equates to a debt write down to Santander and Lloyds for issuing a huge amount of new shares. Small private investors (of which I am one) and pension funds were wiped out in a few hours on Friday afternoon. A rights issue would not work at current share price and no lender will throw new money at this.

2. Why is Carillion in trouble? Well this is complex - main reasons are going lump sum (NEC3 Option A or Option C) on several big projects recently. Carillion miss-priced risk on the Aberdeen bypass and payed badly for this. Smethwick Hospital and Liverpool Hospital hit them hard due to overruns and miss-pricing. Carillion was the most shorted stock for almost 2 years (26% on short at one point). Information was leaking out the company and the city smelt a rat. The share was manipulated down by a collection of huge hedge funds (Blackrock investments etc.) and this put the company in real trouble. The practice of "shorting" is banned in Germany but Mr Cable made no mention of this. The UK allows huge hedge funds to ruin companies and the employees are the ones who will pay. There are some city hedge funds that made hundreds of millions out of the collapse of this company.

3. Will Carillion go bust = No in a nut shell, and it will not receive a penny of public money either. The BBC, Sky et al need to reel it in a bit. On Sunday/Monday evening an RNS is expected from the company saying a pre packed "debt for equity" has been agreed. Carillion staff would not be eligible to TUPE across as their contracts are not being bought out. If it goes bust the employees walk with nothing. I went through TUPE 5 months ago on the UK’s largest construction site and it is not nice.

4. Can the government run Carillion’s contracts = Not a chance! You cannot easily break a JCT or NEC3 contracts without paying heavy penalty clauses (X16 retention clause). The only way to strip the existing contracts is when Carillion call in the administrators (which has not happened here) or they underperform (which has not happened either). How would the government get hundreds of Project Managers, Quantity Surveyors, Contract managers, Civil Engineers in the next few weeks?? Local job centre? I went through all this around 10years ago with the breakup of Metronet, it ended badly for all concerned.

5. What about the Carillion board = well they (Keith Cochrane, Richard Howson and Philip Green (not the famous one!) were rats of the highest order. Howson walked back in July. Cochrane is gone next Friday and Green has gone. They leave the bones of a company. They still get their £1.5 million annual salary (Howson's) for the next 12 months.

Its a snapshot but indicates, if the company sponsor goes bust, there is a risk than their will be insufficient funds to pay all its accrued pensions. There is a government protection scheme, which is explained here. There will be a note in the company's account (normally towards the end) which will outline the present position including sensitivities on changes in assumptions. Only DB schemes.

I'm not saying that Carillion should be saved. I am saying that maintenance of vital infrastructure will require significant public expenditure. I spent some time last week on a Carillion PFI contract and unpicking it is far from easy.

As I said before structurally there should be mechanisms in the contract structure to mitigate any risks. Whilst it will not be painless, there should not be major increases in the cost - that would certainly have been the intent.

Tory's won't bail out the NHS which exists to save lives.

Therefore a construction company should be left to burn by the same logic.

However... In reality the Tories will care far more for a construction company that some of them have vested interests in at some level no doubt.

Hence, it will be bailed out I reckon.

If coconut is right and there has been a debt for equity swap then everything carries on as normal, the existing equity has borne the cost through their dilution, which is what is supposed to happen, and the banks have taken the view that owning equity is the best way of maximising the recovery of their outstanding liabilities.

No it can not be bailed out under European Law currently (as a solvent company). The government were at one day of the 3 days of talks to come up with a plan B in case it does go bust.

Yes Mefty - That's exactly what is happening (not 100% there yet but this is the only way it can end).RNS released by Carillion on Friday at 6pm

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.

The UK news loves a good loser and a hard selling story

Well a story that involves the NHS at threat is always good for sales, I must admit I haven't really followed it but debt for equity would seem be the obvious solution because otherwise all the long term profitable contracts would be lost as presumably there are tear up rights in the event of insolvency. But presumably the banks were assumed to have the power to put it into insolvency, otherwise the equity holders could have held out?

Debt for equity offers the banks a chance to recoupe the money owed (£950 million), administration and everyone walks away with nothing. CArilloins tangible assets are low but their new profit margins are good (typically 5 to 8% for civils and 3 to 5% for new builds). Carillion had their covenants extended to April 2018, just before Christmas. Their debt repayment runs at about 10%. By going debt for equity they will not pay significant coorporation tax for the next few decades (like many companies in debt). They need a bridging loan of around £50million to pay wages. This company will be saved by the private sector and must be saved!

Funny how we already prop up EDF Energy on Hinkley Point, Virgin on the East Coast mainline and Welsh Steel at Port Talbot... but todays kicking is reserved for Carillion... but hey Balfour Beatty were here 2 years ago and before that it was Wimpy and Barret Homes.. etc..

Cheers that clear up my outstanding point, I am aware of the ramifications etc but also good not to assume knowledge.

This company will be saved by the private sector and must be saved!

[url= https://www.theguardian.com/business/2018/jan/14/carillion-crisis-government-locked-last-ditch-rescue-talks ]"But the banks, headed by HSBC, Barclays and Santander, have yet to agree on a restructuring plan and are understood to be reluctant to pour in new funding unless Downing Street takes part in a bailout."[/url]

Totally agree is should be saved but this doesn't sound like the private sector doing it.

Lots of good people...

...Aggressive bidding in competitive tenders.
Poor risk management - including inadequate risk pots....

...Opaque finances.

Carillion are far from alone in this. Several other competitors who operate in the same sectors are similar but haven’t been bitten so hard or exposed yet.

cranberry

u OK hun ?

Thanks for asking, I’m perfectly fine thanks.

How about yourself?

Carrilion van passed me today, sticker on the back said ZERO HARM, idiot driving obviously hadnt read it as he overtook and swerved left into a mcdonalds,

If it does go bust who is going to organise the multitude of contrators and suppliers being transferred to new companies, and what happens if they dont move, but just stay off work as a protest, also will suppliers who havent been paid be willing to supply the same subies on a new contract.

Why would they stay off work as a protest? Shirley I f you don’t turn up for work then automatically HR are informed and process gets underway, SSSN and the like.
Seems odd for folks not to turn up to work knowing/not knowing if they’ve got a job to go to..

Depend if youre self employed or paid to be in work, whos going to be paying you if the firm goes bust

coconut - when were you at Metronet, I was involved with Tube Lines then did some work with the post crunch Metronet bcv/ ssl.
I hope that Carillion find a way out of this mess, coming from Wolverhampton - my family has ties going back 50 years or more with Tarmac.

I worked for Atkins as part of the Metronet PPI around 10years ago. I am really rooting for Carillion too. This is still a profitable company with a huge forward order book (£16bn in the pipe line). Carillion won all the government contracts in fair and open market, but are being made out to be some demon company who is now screwing the government over. An announcement will come from carillion tomorrow confirming their future, I still believe/hope it will be rescued privately.

Sounds like them and their partners are taking a big hit on the Aberdeen bypass project which is a fixed price contract. Not totally clear why it is so over budget, but it is a huge project. So in effect on this project the government is screwing the contractor.

Aberdeen Western Bypass is a PFI type deal; if Carillion goes bust the banks will step in to preserve their investment. The other partners will be severally liable/ entitled too, so will probably go on in any event, and the banks not need to step in.

Not sure why AWB has been such a disaster, but it's a good example of the upside of PFI, from the public's point of view - when it all goes tits up, the consortium has to soldier on and the public has a fixed price contract.

They’ve just gone POP...

Entering administration 🙁

[url= http://www.bbc.co.uk/news/business-42687032 ]Breaking BBC News - to go into liquidation[/url]

No bailout, which is not a surprise, as it would have been illegal to do so and private companies must stand and fall on their own.

private companies must stand and fall on their own

Unless they're banks. Today will be interesting, the company I work for has had a working relationship with Carillion for a long time and we had some work in the pipeline with them. Bad payers occasionally, but on the whole decent to work with.

No doubt this is something that [b]aP[/b] and [b]Coconut[/b] already know (as they are clearly close to Carillion, or local to the W Mids area, or both), but Sir Vince of Cable was way out on at least one of his recent soundbites, it may have been on Saturday morning. Carillion have not in any real sense been 'better known as Tarmac' for a very long time.
18, maybe 19 years ago, there was a division of Tarmac PLC called Tarmac Construction. It operated alongside the Quarries Division, the International Division, the Housing Division, the Industrial Division and a couple of others; for perfectly sound commercial reasons at the time, mainly around focussing on core businesses, Construction was hived off into a completely independent business which floated its own share capital and took on the brandname Carillion. It's been absolutely nothing to do with Tarmac, apart from being a customer of their quarries and concrete businesses, ever since.
A bit like not believing everything you read on the internet - don't believe everything a politician says!

As an ex Carillion employee (over 10 years ago), I just want to say that this is probably going to be a really tough time for many of the staff and subbies and I wish you all the best. I hope things get sorted out soon.