January 11, 2018 / 12:14 PM / a year ago

Carillion shares fall as market awaits news on financing deal

Jan 11 (Reuters) - Shares in debt-laden British building and services company Carillion Plc sank 15 percent on Thursday in the absence of news on a deal needed to shore up its finances.

Many observers have warned that the 200-year old company, responsible for some of Britain’s highest profile infrastructure projects, risks collapse if it does not reach a deal with lenders to restructure its finances.

The company, which employs 43,000 people, said on Saturday that it would meet creditors on Wednesday and that it could recapitalise or restructure its balance sheet in other ways.

By lunchtime on Thursday there was no word on the outcome of the talks.

Cabinet office minister Oliver Dowden said on Wednesday that the government was making “contingency plans for all eventualities” related to Carillion which is working on the HS2 high speed rail link between London and Birmingham and helps maintain Britain’s roads, schools and hospitals.

The company, which also operates in Canada and the Middle East, has been fighting for survival after contract delays and a drop in new business left it grappling with losses of more than 1 billion pounds ($1.35 billion) in the first half of 2016.

Analysts estimate the company has debt and liabilities including provisions, pensions and accounts payable of as much as 1.5 billion pounds ($2 billion) when its market capitalisation has slumped to under 100 million pounds - less than a tenth of what it was this time last year.

In December, Carillion said discussions with stakeholders about its options to cut debt and avoid a breach of debt covenants were “progressing well”.

The Wolverhampton-based firm has been selling assets to cut debt. Its problems have been compounded by pension obligations and delays in collecting cash from clients.

After the financial crisis, British construction companies bid low prices for long-running, fixed-price contracts to keep work coming in. This left them exposed whenever the projects faced delays or bigger than expected costs.

The broader industry is also suffering from delays in UK public spending decisions as Britain negotiates its departure from the European Union.

The Financial Conduct Authority (FCA) is investigating whether Carillion appropriately disclosed its financial position in the run up to a series of profit warnings issued in the past six months.

Last month, Carillion brought forward the start date for new chief executive Andrew Davies to Jan. 22. Davies, head of family-owned builder Wates Group and formerly with defence company BAE Systems, will replace interim CEO Keith Cochrane. ($1 = 0.7413 pounds)

Reporting by Arathy S Nair in Bengaluru; Editing by Keith Weir

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