Exclusive: Receivers believe Carillion’s construction arm had liabilities of nearly £7bn when it collapsed in January.
In a letter seen by Construction News, the official receiver has estimated Carillion Construction’s liabilities were £6,905,532,000 when it entered liquidation on 15 January.
The figure was revealed in a series of reports written by the official receiver examining the 27 Carillion businesses currently in liquidation.
These included reports for Carillion plc, which is estimated to have had liabilities of more than £4.4bn, and Carillion Services, which owed more than £660m.
Some of the liabilities included in the final estimate are joint liabilities between two or more Carillion companies and therefore cannot be counted twice in calculating total liabilities.
The letter to creditors from official receiver David Chapman said: “At present the current estimate of total liabilities [for Carillion Construction] as at 15 January 2018 is £6,905,532,000.
“It is my expectation that this early estimate is highly likely to change as more certainty surrounding where liabilities lie and true liability for pension schemes in deficit become known.”
The liabilities cover the amount of money owed by Carillion when it collapsed. This would include money owed to trade creditors, borrowings owed to the banks, or the money owed to Carillion’s pension funds.
When asked what the breakdown of these liabilities was, the official receiver said it was too early to provide details, as this estimate was likely to change.
The official receiver did confirm money owed through the contractor’s controversial early payment finance scheme had been included in the estimate.
CN reported last month that Carillion owed those banks that operated the early payment system between £250m and £300m for payments made to Carillion subcontractors.
A spokesman for the official receiver told Construction News: “We can confirm that the official receiver has produced reports detailing the current understanding of the financial position of the companies that are in liquidation.
“This position is expected to change significantly as assets and debts are fully identified and assigned to individual companies within the group structure.
“The reports will assist Carillion’s creditors to assess their eligibility for bad debt relief.”
In the last accounts posted by Carillion Construction before the group’s collapse, covering the year to 31 December 2016, the construction business owed £1.9bn to creditors.
This included £789m to companies within the group, £66m to joint ventures and £343m to trade creditors.
Carillion plc’s liabilities as of its last accounts were just over £2bn, with trade payables accounting for £749m of that.
Discussing the likelihood of Carillion’s construction creditors receiving any money back, Mr Chapman wrote: “It is too early to know an accurate estimate of the level of realisations that will occur, as the company had little in the way of tangible assets.”
When asked by CN what the current level of assets found by the receiver was, a spokesman said it was too early to offer a figure.
Insolvency Service chief executive Sarah Albon told the Carillion select committee in February that the group’s assets would not be sufficient to pay suppliers for work prior to its collapse.
CN understands that there is no prospect of any payment being made to creditors until all assets are sold and legal issues resolved. Sources have told CN that it could take more than a year for the receiver to understand the true scale of Carillion’s liabilities.
Following the collapse of Carillion in January, Build UK estimated up to 30,000 businesses were owed money by Carillion for work carried out prior to the liquidation.
Build UK boss Suzannah Nichol said at the time that, historically, 17-18 per cent of creditors do not survive past five years following construction company failures.
The construction sector is already beginning to see its first casualties as a result of the Carillion collapse.
Earlier this month administrators were appointed at M&E firm Vaughan Engineering Services after the company lost £1.7m following Carillion’s demise.
Last week Irish construction firm Sammon Group applied from protection from its creditors after being left owed €8m by Carillion for work on six schools in Ireland.
When asked by CN to comment on the official receiver’s figures, SEC Group chief executive Rudi Klein said: “The amount of Carillion’s indebtedness is becoming more incredible by the minute.
“The bulk of this staggering figure will be made up of trade debts including millions of pounds worth of retention monies.
“Decisive action by the government to protect supply chain monies is required now, not more long-winded consultations.
“I’ll be raising this with a group of MPs I’m due to meet in the next week.”
The 27 Carillion businesses in liquidation
- Carillion Plc
- Carillion Construction Limited
- Carillion Services Limited
- Planned Maintenance Engineering Limited
- Carillion Integrated Services Limited
- Carillion Services 2006 Limited
- Carillion LGS Limited
- Carillion Asset Management Limited
- Carillion Energy Services Limited
- Carillion Fleet Management Limited
- Everprime Limited
- Postworth Limited
- TPS Consult Limited
- Carillion Specialist Services Limited
- Carillion Utility Services Limited
- Carillion AM Government Limited
- Sovereign Hospital Services Limited
- Carillion JM Limited
- Carillion Holdings Limited
- Carillion Project Investments
- Schal International Management Limited
- Sovereign Consultancy Services Limited
- Dudley Bower Group plc
- PME Technical Services Limited
- PME Partnerships Limited
- Carillion Professional Services Limited
- Carillion Property Services Limited