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Carillion bosses make last-ditch plea for rescue

Bosses at Carillion have appealed for a state-backed rescue, telling ministers that its survival rests on a bail-out of the firm’s most troubled contracts.
The crisis-hit construction firm, one of the largest suppliers of services to the public sector, has called on the government to step in to reduce the financial burden of a string of failed projects around the country. It is understood that the cry for help centres around three public private partnership (PPP) contracts in the UK.
Although the company has refused to name the trio of bungled contracts, problems with building the ?350m Midland Metropolitan Hospital in Smethwick, expensive delays constructing the ?335m Royal Liverpool Hospital and a ?550m stretch of the Aberdeen bypass, top the list.
It has also asked Whitehall to pledge to dramatically speed up future outstanding payments. 
The Government is notoriously slow at settling bills with contractors, and frequent delays have exacerbated Carillion’s cash crunch. The Government denies that payments have been delayed, however, saying that it has a long-standing policy commitment to pay 80% of undisputed and valid invoices within 5 days with the remainder paid within 30 days.
It is the UK’s second-largest construction company, employing 43,000 people globally. It oversees some of the largest government contracts in the country, in particular for the ministries of justice, transport and defence. It maintains 50,000 homes for the Ministry of Defence, manages nearly 900 schools and is heavily involved in the highways and prisons.
The company’s advisers are attempting to pull-off one of the most complex restructuring deals in recent memory, assembling a coalition of banks, bondholders, suppliers, and other creditors. However, government intervention is crucial. 
Carillion
“It’s about resetting some of the big contracts and making them less loss-making,” a source close to the company said. Without that support, the chances of Carillion’s banks agreeing to a debt-for-equity swap in return for another round of emergency funding is unlikely, it is understood.
Talks are expected to continue through the weekend but unless a deal can be struck soon, the company could be put into administration as soon as Monday, triggering massive losses for lenders, shareholders, suppliers and pension scheme members.
High-level government meetings discussing the Ministry of Defence and HS2 contractor’s future spilled over into the weekend and a 50-strong team from PwC has been drafted in to advise on contingency plans in the event of the firm going into administration.
Trade credit insurers, including Euler Hermes, Tokio Marine HCC and MGA Nexus, have stopped writing new insurance coverage protecting the firm’s suppliers from losses in a collapse, according to the Insurance Insider.
In the wake of three profit warnings in less than six months, Carillion’s share price plummeted 93pc  in 2017 as soured contracts on paper-thin margins came back to haunt the fim. Its shares hit an all-time low on Friday of 
14.2p. Carillion’s lenders put up ?140m of new loans last October but are reluctant to increase their exposure following a serious deterioration in the firm’s prospects. Carillion is locked in a desperate bid for survival after issuing a profit warning last year. It is also buckling under the weight of more than ?1.5bn of debt and a giant pension deficit of nearly ?600m.
The firm was thrown a lifeline just before Christmas when its lenders delayed a test date for its financial covenants until April 30 but the situation reached a critical level on Wednesday when a business plan presented to banks was rejected.
Carillion bosses make last-ditch plea for rescue

Liberal Democrat leader Sir Vince Cable has spoken out against a bailout
Sir Vince Cable, the Liberal Democrat leader, said that the Government cannot bail out Carillion as it would allow the “private sector to privatise profits” while the “Government nationalises the losses”, adding that the Government should not have given the troubled outsourcer contracts in the wake of a string of profit warnings.
He told BBC Breakfast: “The government, and particularly the Department of Transport and Network Rail, have been handing out to them very big contracts knowing that they were fragile and there is a degree of recklessness here with public money that we need to have properly investigated.” 
The Government should force the shareholders and creditors to swallow losses from a collapse and then bring contracts back into public hands to make sure they can be delivered, Mr Cable added. 
Just a week after its shock profit warning in July, the government named Carillion as one of the winners of ?6.6bn worth of contracts to deliver part of the new HS2 rail line. Transport secretary Chris Grayling defended the government’s decision, saying that it had received “secure undertakings” that the contracts would be delivered.
In November following another profit warning, the beleaguered firm bagged two contracts with Network Rail worth ?320m.
Predicting a huge share price collapse, hedge funds placed large bets against the troubled contractor by shorting its shares with 16pc of Carillion’s share still out on loan to short-sellers.
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