Magic Circle scrambles as UK construction giant Carillion falls into liquidation

Magic Circle scrambles as UK construction giant Carillion falls into liquidation

A heavyweight line-up of Slaughter and May, Freshfields Bruckhaus Deringer, Dentons, Clifford Chance (CC) and Linklaters have mobilised as construction giant Carillion files for liquidation in one of the largest UK insolvencies for years.

Dentons’ restructuring partners Nigel Barnett and Neil Griffiths are also advising the liquidator, the Official Receiver, which the government will be providing with funding required to continue to carry out the company’s public services.

Freshfields has also landed a substantive role on the liquidation, led by restructuring partner Adam Gallagher. Dentons and Freshfields are also advising PwC as the court-approved manager of the liquidation.

The collapse came after talks between the Wolverhampton-headquartered company, its creditors and the government failed to reach a deal on its £1.5bn liabilities, including £900m in debt. An application to the High Court for a compulsory liquidation was made on Monday (15 January) morning.

Slaughters partners William Underhill and Ian Johnson had acted for the UK’s second largest developer on the talks, along with restructuring partner Tom Vickers and corporate partner Sally Wokes.

CC’s restructuring partner David Towers has advised Carillion’s main banks, Barclays, Royal Bank of Scotland and HSBC.

Linklaters also represented the main lenders on the talks, along with Akin Gump Strauss Hauer & Feld and Willkie Farr & Gallagher. Akin is acting for private placement noteholders, fielding a team under London restructuring partner Barry Russell.

Last summer Carillion announced more than £800m of write-downs and appointed a team from EY to identify cost savings, led by North West senior partner Bob Ward.

Carillion’s liquidation raises questions over the future of the company’s 43,000 staff – 20,000 of them in the UK – as well as the projects the company is developing, including as the HS2 high-speed railway linking London, Birmingham, the East Midlands, Leeds and Manchester. The company also manages 50,000 homes for the Ministry of Defence and around 900 school buildings. The company has a turnover of around £5bn.

The Pension Protection Fund (PPF) will be managing Carillion’s pension funds, which have a deficit of £587m. The company’s UK pension schemes have around 28,000 members, making it the largest fund the agency has ever taken on.

The liquidation will be a hugely complex process, potentially impacting hundreds of subcontractors and involving issues of state ownership and liability. The collapse comes amid what has been a relatively slim pickings for restructuring advisers, with years of ultra-low interest rates resulting in a dearth of insolvency work.