The construction company conceded on Monday that last-ditch attempts to save the firm had not been successful and confirmed it would be entering into a compulsory liquidation with immediate effect.
The Wolverhampton-based firm met with key stakeholders, including the government, over the weekend to attempt to tackle its £900m debt and £587m pension deficit, as well as strengthen the group’s balance sheet.
As one of the UK government’s biggest contractors, Carillion’s collapse has threatened the jobs of its own 43,000 employees, not to mention hundreds of subcontractors and small business partners.
Its shares closed out their final day of trading last Friday at 14.7p, after plunging 25% from their starting point in the day as news of a credit crisis bubbled.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years,” said Philip Green, the firm’s chairman.
“Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period. In recent days, however, we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.
“We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.”
The firm’s sudden demise will also be a serious blow for major shareholders like Hargreaves Lansdown Stockbrokers, Brewin Dolphin and Scottish-based asset manager Kiltearn Partners who at one point collectively owned more than 22% of the business, according to markets data from the Financial Times.
However, it was reported that Kiltearn Partners whittled down its stake considerably before the end of last year from 9.85% in August to 4.9% by December.
Over the past 12 months, Carillion saw its share price value decline by 94% spurred on by a series of profit warnings and an FCA probe. The firm first hinted that major problems were afoot back in July when it alerted shareholders that it would have to payout £845m to exit underperforming contracts.
Despite these red flags throughout the summer, the government issued £2bn worth of contracts to Carillion shortly after its first profit warning in July.
The construction company’s collapse was welcome news for hedge funds who are believed to have pocketed tens of millions of pounds from shorting Carillion stocks. Hedge funds had been betting against the company as far back as 2015, but that number peaked following the firm’s first profit warning last year.
