Investors’ views of Carillion have turned “very negative” after rumours of contact with administrators emerged, according to analysts.
Sky News has reported that Carillion has asked EY and PwC to “stand by” in case of a possible administration of the embattled company.
Carillion’s share price dived more than 25 per cent by lunchtime following the news.
CMC market analyst David Madden told Construction News that this represented a significant shift in investor sentiment.
“Traders have got completely nervous,” he said.
“Even the mention of the word ‘administrators’ sends out a very negative image, even though it might be the prudent thing to do.
“From this point forward I suspect that market sentiment is going to be very negative.
“Very few people are going to step in to purchase this stock because it’s become that much riskier on the back of this.”
ETX senior market analyst Neil Wilson suggested those still holding shares were possible “taking a punt” having bought them cheaply.
He added that following today’s rumours, which saw Carillion’s shares drop as much as 39 per cent at one points, there was little the company could do to prop up the price.
“I don’t think there’s much they can do to reassure anyone now,” he said. “I think the shares have collapsed so much they’re practically worthless.”
On Friday afternoon a regulatory filing showed that the company’s biggest shareholder, Deutsche Bank, had reduced its shareholding in the company from 5.89 per cent to less than five per cent on 10 January. This was the same day Carillion met with lenders to present its plans.
Deutsche Bank has been selling off a large number of shares in recent weeks, with its holding falling from 7.89 prior to 29 December.
Carillion will today meet with civil servants, The Pensions Regulator, Pension Protection Fund and City advisers to discuss its £587m pension shortfall.
The Financial Times has also reported that senior ministers, including Cabinet Office minister David Lidington, business secretary Greg Clark, transport minister Jo Johnson and chief secretary to the Treasury Liz Truss, met to discuss the implications of Carillion’s difficulties.
A Cabinet Office spokesperson confirmed to Construction News that the meeting did take place yesterday.
They added: “As Carillion is a major supplier to government it should come as no surprise that we are carefully monitoring the situation while working to ensure our contingency plans are robust.
“The company has kept us informed of the steps it is taking to restructure the business.”
On Wednesday the company held crunch talks with 200 of its lenders to present proposals for addressing the company’s debt, which stands at around £1.5bn, including its pension liabilities.
A decision from the company’s lenders on Carillion’s proposals is expected before the end of the month.
On the basis of the government’s interest and lenders making a decision, Mr Wilson said Carillion’s future is now out of its own hands.
“It’s in the hands of the banks and the government and how they decide to deal with it,” he said.
But he still believes a deal will be done to save the company.
He said: “Carillion can operate. It’s got contracts, it’s got assets, it can work. It’s just got to get rid of the debt.
“They’ll knock something together, but it’s not going to be pretty and it’s probably not going to be pretty for a while.”
Carillion and EY declined to comment on the administrator rumours.
PwC have been contacted for comment.
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