Carillion bankers set up £225m fund to help subcontractors

Robyn Valdez
January 19, 2018

The Financial Times reported on Wednesday that the government was monitoring the company.

Lloyds' pledge may be followed by similar moves by other banks after the United Kingdom government asked banks to help firms affected by Carillion's collapse, the BBC reports.

Shares in British contractor Interserve plunged on Wednesday after a report the United Kingdom government was monitoring the company, exacerbating worries about the sector two days after the collapse of competitor Carillion.

Interserve, like the Government, sought to distance itself from the collapse of Carillion.

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Carillion issued a second profit warning at the end of September and about five weeks later was awarded a 62 million pound rail contract.

This prompted a string of profit warnings and a first-half loss of more than £1 billion.

A Cabinet Office spokesperson said: "We monitor the financial health of all of our strategic suppliers, including Interserve. We are in regular discussions with all these companies regarding their financial position", a spokeswoman for the UK Cabinet Office said.

Separately, Lloyds Banking Group said it had set up a £50m package of support to its small business customers within Carillion's supply chain affected by the liquidation.

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The company said in October it may not meet debt covenants after a further revenue slowdown, though the shares surged last week when Interserve forecast 2018 earnings ahead of market expectations.

This follows yesterday's news that more than 90% of the Carillion staff employed on private sector contracts will continue to be paid by Carillion's clients while its liquidation proceeds.

The Group's support will also include guidance on working capital requirements to help firms unlock cash so they can manage their way through the difficulties they now face.

A spokesman said the banks withdrew funding from Carillion because of "viability", adding: "There are reasons the Carillion situation happened". While the company "clearly" has too much debt, there are businesses to sell and Liberum believes shareholders would support an equity raise.

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