Carillion Plc’s collapse under about 1.6 billion pounds ($2.2 billion) of debt will hand losses to banks, bond investors and suppliers. Shareholders of the U.K. builder and service provider will be wiped out.
More than half the borrowing is owed to banks led by a 835 million-pound loan from lenders including Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, according to a September company statement and data compiled by Bloomberg. The company also has about 630 million pounds of privately placed and convertible bonds outstanding. Its pension plan has a deficit of 587 million pounds.
The company’s loans and bonds were quoted at less than 5 percent of face value, according to people familiar with the matter, who asked not to be identified because they’re not authorized to talk about it.
Carillion’s failure will also hit small-to-medium-sized suppliers and subcontractors across its operations, which encompass working on a new high-speed railway, cooking school meals and maintaining soldiers’ homes. The Wolverhampton, central England-based company filed for liquidation after failing in last-ditch efforts to get support from lenders and the government.
Banks were getting wary about Carillion at least as early as September. Lloyds and RBS both took losses on loans to the company in their third-quarter results, a person familiar with the matter said at the time. Representatives for Lloyds and RBS declined to comment on the situation.
Five lenders also demanded high rates for new debt as Carillion tried to steady its finances in October. The banks charged 8 percentage points above the London interbank offered rate on a 40 million-pound secured facility and an initial 10 percentage points above Libor on a 100 million-pound unsecured loan.
Carillion’s 170 million pounds of convertible bonds have traded at about 20 pence on the pound since late November, mirroring a stock collapse that has wiped out investors in a company worth 1 billion pounds less than a year ago, according to data compiled by Bloomberg.
Shareholders have “no prospect of any return,” liquidator PricewaterhouseCoopers said in a statement.
Carillion has about 350 million pounds of privately placed sterling and dollar notes, which mature through 2024, according to a statement. Its Schuldschein borrowings, a type of German promissory note, in sterling, dollars and euros run through 2022.
The builder’s pension plan will be taken over by the Pension Protection Fund, a rescue fund, the BBC reported. The company employed about 43,000 people in the U.K., Canada and the Middle East, and annual sales surpassed 5 billion pounds, according to its website.