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Carillion pleaded with government for short-term £150mln loan to avoid collapse

Shareholders are said to be considering taking legal action against Carillion
Carillion confirmed its collapse on Monday

Carillion PLC (LON:CLLN) had reportedly pleaded with the government for a £150mln three-month loan to avoid collapse.

In the days leading up to its demise, the construction company had asked for the short-term loan to support its turnaround efforts and raise new commercial loans that would be used to repay the state, the Financial Times reported.

READ: Carillion debacle: Six lessons investors can draw from the construction contractor's collapse

A letter, drafted by the group’s legal advisers Slaughter and May, was sent on January 1 to request the funding. It argued the government loan would allow Carillion to reassure lenders and secure the support of new investors for £100mln of extra longer-term funding.

Carillion confirmed its collapse on Monday after the failure of rescue deal talks with its key financial and other stakeholders, including the government and lenders, over the weekend.

It has made an application to the High Court for a compulsory liquidation.

Carillion had issued a string of profit warnings after losing money on contracts and racking up large debts before admitting defeat.

Carillion investors mull legal action

Shareholders are now considering legal action against Carillion on claims the company failed to inform them of the extent of their financial struggles, The Telegraph reported.

A leading litigation fund told the newspaper it had fielded calls from shareholders demanding an investigation into the company.

However, given the low value of Carillion’s assets, shareholders could instead explore taking against its auditors, KPMG.

The Financial Reporting Council has signalled that it was looking to investigate KPMG after the auditor received criticism over its signing off of Carillon’s books 10 months ago.

KPMG said it would ­co-operate fully with any inquiries that were made into its actions but believes it conducted its work with Carillion “appropriately and responsibly”.

Banks offer support to small firms hit by Carillion collapse

On Thursday, Royal Bank of Scotland Group PLC (LON:RBS), Lloyds Banking Group PLC (LON:LLOY) and HBSC Holdings (LON:HSBA) said they would provide funds to support small businesses affected by Carillion’s failure.

Lloyds is setting up a £50mln fund, RBS is offering £75mln and HSBC will provide £100mln.

Nationwide building society also said it will take in-house jobs, which were performed by Carillion, and wanted to provide "reassurances" at an "unsettling" time.


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January 29 2019
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