Carillon are the worst in rent seeking opportunists. Instead of the government managing major infrastructure projects like they should, they fob them off to the lowest bidder (i.e., Carillion) without proper due diligence. They in turn subcontract to other construction industry businesses.Seemingly going bust, so what effect on the road, rail and infra of the UK?
Cost rises due to less competition???
Yup. Very much torn on this one. Bailing them out would further entrench a moral hazard which seems prevalent in British corporate life. You should not be able to run a business irresponsibly knowing that the government will bail you out if you feck things up. By the same token, I feel super bad for all of the workers who are going to lose their jobs, and construction companies that are likely to go out of business. They are innocent parties.Not good news for workers but good for taxpayers.
Carillion has clearly been irresponsible and haven't acted appropriately, namely issuing dividends after a profit warning and knowing full well this was coming.
If they go into administration then you are probably correct. There are a few caveats though. For example, if insolvency means the company is unable to fulfil its contractual obligations under the PFI, this might give scope for the government to terminate contracts (or at least extract concessions). There could also be break clauses related to insolvency.Presumably the PFI contracts will be assets sold on by the administrator.
Carillion has debt and liabilities of £1.5bn pounds with creditors that include banks RBS, Santander UK, HSBC and others. It has a pension deficit, included within that figure, of £580ms.
In terms of assets Carillion based on its 2016 accounts has tangible plant and machinery of £144m, a fraction of its overall debts, not to mention the £800m pensions liabilities.
http://www.bbc.co.uk/news/business-42687032Damned if they did, damned if they didn't?
The government refused to insure Carillion's debts, so the banks pulled the plug. If it had offered guarantees to big banks on behalf of a private company it might have been accused of nationalising losses while privatising profits.
The whole point of having private companies do public work is that they shoulder some of the risk. The truth is the government has been helping out Carillion for a while. Awarding it contracts when it knew it was in trouble raised eyebrows last year.
The government constructed the HS2 contracts so that Carillion's joint venture partners would take on the work if the company went bust - meanwhile it hoped the new contracts would be enough to make Carillion's lenders feel reassured.
Industry sources tell me that if the company hadn't been awarded new government work it would have been curtains for Carillion months ago.
my thoughts exactly, probably obfuscated through some elaborate chain of companies to hide away any conflict of interestsI would be interested to see how many politicians are substantial shareholders in the company. One of the NEDs is Baroness Sally Morgan (a labour peer) and one chairman of Segro pensions and another a trustee of Tesco pensions. These people need to be held to account in not carrying out their statuatory duty especially where it is in direct conflict with their other roles.How can a NED with pension expertise oversee such a huge pension deficit?