MoD contractor ‘Carillion’ in financial difficulty

There is speculation that the Government – which is a major customer – might be asked to step in with financial support as the company buckles under a £900m debt load.

And now the meetings with banks have been brought forward as troubles intensify at Carillion, which counts the Ministry of Defence as one of its biggest customers – acting as the buildings maintenance contractor across all three armed services.

Carillion still has some good contracts but its huge debt load and pension liability now outweigh the enterprise value.

“There’s a chance of a debt-for-equity swap,” said one analyst. “But it’s hard to see how willing banks would be to risk putting more money into the business.”

Another analyst questioned whether the Government would be willing to step in, saying there were “no historical precedents in the sector”, but noted that Carillion’s size – it employs almost 20,000 staff in the UK and a further 10,000 internationally – could be a factor.

Carillion’s troubles continued last week when the Financial Conduct Authority said it was investigating the “timeliness and content” of Carillion’s market announcements ahead of profit warning.

Formed in 1999 from a demerger from the ‘Tarmac Group’ Carillion has most of its business is in the United Kingdom, but it also operates in several other regions, such as Canada, the Middle East and the Caribbean.

In November 2016, Nottingham University Hospitals NHS Trust reported that it planned to end its estates and facilities services contract, awarded in April 2014 with the company, after nurses had been forced to clean the wards, because of a shortage of seventy cleaning staff