Carillion faces Wednesday showdown with lenders to safeguard future

 
Oliver Gill
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The FCA announced a probe into Carillion earlier this week (Source: Carillion)

Troubled contractor Carillion faces a pivotal showdown with lenders next Wednesday, hoping to convince them to plug a massive funding gap and safeguard the future of the firm and its 50,000 global workforce.

The Wolverhampton-headquartered company will present a business plan to a syndicate of lenders led by Royal Bank of Scotland, Barclays and HSBC on 10 January.

Carillion insists the plan will provide the foundations for a turnaround it hopes will arrest a share slide that saw 90 per cent of stock market valuation wiped away in 2017.

Earlier this afternoon Sky News quoted sources saying "the next two weeks are critical" for the firm. It was reported Carillion's current funding gap runs into hundreds of millions of pounds.

EY has been assisting Carillion's management since July, providing crisis management and helping to maximise cash coffers.

Carillion had pinned its hopes on raising £300m by selling assets, the majority of which it was hoped would be realised from sales in Canada. However, while some smaller UK operations have been sold, the firm has not managed to flog subsidiaries across the pond.

Must read: Revealed: Behind the scenes of Carillion's annus horribilis

The London-listed firm is due to pay back a £40m of emergency funding by the end of April. Lenders extended £140m cash last autumn in the hope it would provide the HS2 contractor with sufficient breathing space. The remaining £100m must be repaid at the end of this year.

Earlier this week the Financial Conduct Authority (FCA) announced a probe into Carillion over its stock market communication in the months prior to a shock announcement in July of £845m of contract write-downs.

The investigation followed a report by City A.M. exposing the depth of the problems at the company and how hedge funds were seemingly aware of them well in advance of last summer.

Today, a Carillion spokesperson said:

Carillion is in constructive discussions with a broad range of stakeholders regarding its options to reduce net debt and recapitalise and/or restructure the Group's balance sheet. The Group is currently finalising its business plan, which it intends to present to its financial creditors and certain other stakeholders on Wednesday 10 January 2018, in line with the previously announced timetable. Once finalised, the business plan will provide the basis for the agreement of a proposal to restore Carillion’s balance sheet.

Read more: Carillion’s banks were left on the sidelines while shares plummeted

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