Carillion’s stock market valuation hit fresh lows last week, with the stricken contractor now worth little more than £70m.
The firm’s travails have been well documented; massive contract write-downs and mind-boggling losses have been pounced upon by short sellers convinced the worst is yet to come.
With Carillion's shares starting the year at 236p each, there have been winners and losers from a plunge that now sees them priced at 17p a pop.
A maze of hedge funds, resolute in their opinion something was awry since late last year, have booked enormous profits.
On the losing, long side have been shareholders who may yet see value melt away completely. Joining them is Carillion’s banking syndicate, led by Royal Bank of Scotland, Barclays and HSBC. City analysts expect the banks to turn hundreds of millions of pounds' worth of debt into equity as the company fights to turn itself around.
But despite facing a mammoth write-down for months banks have been hamstrung from taking affirmative action until comparatively recently. This is because it was not until 17 November Carillion admitted it would breach its lending covenants.
“How does a company making a £1.1bn loss not break a single covenant?” asked a leading sector analyst. "The guy in charge of their treasury department deserves a bloody medal."
Earlier in the summer, when Carillion had not yet breached its covenants, it was able to drive the crisis management procedure, bringing in EY on 17 July. It is a subtle, but important, point that EY was not brought in by the banks, which subsequently engaged FTI Consulting.
After Carillion announced a £845m write-down on 10 July shares fell to 56p. By the time the company admitted a covenant breach was on the cards they had slipped to 21.5p. This means £150m had been wiped off Carillion’s market cap between 11 July and mid-November.
During that period the banks' ability to influence proceedings was limited, despite their position considerably worsening. The lack of covenant breach made it hard for them to have meaningful input and proactively manage a situation that was set to hit them hard.
Carillion's troubles have exposed frailties in the construction and logistics sector. Lenders to sector rivals should be wary of how the company has been allowed to plough its own furrow after the event. Contracting can be a risky business and banks would do well to protect themselves by making sure, that when alarm bells ring, they are able to step in sooner rather than later.