Carillion – what happens now?


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The final cost to the UK construction industry of Carillion PLC and a number of its subsidiaries, including Carillion Construction Limited, being plunged into liquidation on 15 January 2018 isn't likely to be known for quite some time.

But in the immediate aftermath many developers who had engaged Carillion on commercial development projects, as well as trying to get their projects back on track, may find themselves having to renegotiate terms with the lenders to those projects.

Many developers will have entered into financing arrangements to fund the projects that they were working on and those developers with LMA-based funding agreements may find themselves in default as a result of their Carillion counterparty becoming insolvent.

This adds an extra layer of complexity as, in addition to having to:

  • Assess the state of the works on site in order to be able to review and, in many cases, revise their procurement strategy
  • Determine when to terminate contracts entered into with Carillion
  •  Ascertain the costs of employing alternative providers who, in an already stretched market, will likely charge a premium for taking over the development
  • Confirm how much money the sub-contractors employed on site by Carillion were owed at the time it went into liquidation and how much of that had already been drawn under its funding agreements but not been paid to the sub-contractors
  • Enter into new subcontracts as stepping-in to existing contracts will not, unless there is absolutely no other option, be a viable option

Developers will be trying to agree terms with their lenders to avoid being defaulted themselves as they endeavour to get their projects back on track.

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