Government let slip chance to retrieve £364m from Carillion

The government knew of a plan that could have retrieved more than £360m from Carillion, limiting the cost of its collapse to taxpayers and sparing pension scheme members from cuts to their retirement payouts, but did not encourage directors to pursue it.

Multiple sources told the Guardian that the Cabinet Office, responsible for oversight of government contractors, did not apply any pressure on Carillion’s directors to adopt the proposals, presented by accounting firm EY in mid-December last year.

EY’s plan would have involved breaking up the company, selling the profitable parts and placing the rest into liquidation, avoiding an involuntary collapse.

The accounting firm believed this would generate £364m, of which £218m could be injected into the firm’s 13 pension schemes, estimated to have a deficit of close to £1bn.

One source familiar with the company’s final weeks said this could have prevented some of the schemes entering the Pension Protection Fund (PPF), an outcome that will reduce the amount that many of its 27,500 members receive in retirement.

A spokesperson for the former directors admitted last week that they rejected EY’s plan, believing they could still engineer a turnaround by convincing banks to swap some of their debt for stakes in the company.

Several sources have confirmed to the Guardian that the Cabinet Office also saw EY’s calculations but did not put any pressure on Carillion directors to pursue it.

EY drew up two scenarios, an involuntary insolvency that would leave little cash to pay creditors, pensioners and the administrators, or the break-up plan that could have raised £364m.

Source: theguardian