Sky News has learnt that Carillion, which is building the HS2 high-speed rail link and other big Government infrastructure projects, could crash into administration as soon as Monday.
Its fate hangs on the outcome of emergency talks due to take place on Sunday with Whitehall officials.
The company has drawn up a plan that would see it being able to borrow significant amounts of new funding from its existing lenders if the Government agrees to guarantee payments at certain stages of public sector contracts.
One insider said it was “a make-or-break weekend”.
“Without that commitment of support from the Government, administration is all but inevitable,” they said.
Officials and Carillion’s lenders are understood to have held emergency talks on Friday night – the latest in a series of crisis meetings conducted in recent days.
Government sources indicated this weekend that ministers had decided against providing a direct financial bailout to loss-making Carillion and were also likely to be lukewarm about the latest rescue blueprint.
That decision, which sources close to the company said they were unaware of on Saturday, would expose Theresa May’s administration to a protracted and potentially chaotic fallout from the failure of a major Government delivery partner.
Employing 19,500 people in the UK alone, Wolverhampton-based Carillion is the second-largest supplier to Network Rail and maintains approximately half of the UK’s prisons as well as roughly 50,000 homes for the Ministry of Defence.
It is also engaged in building the Aberdeen Bypass as well as schools across Britain.
Without support from the Government, Carillion’s syndicate of banks will not provide up to £300m of new funding required from the end of the month.
Sky News revealed on Friday that EY, the accountancy firm, had been placed on standby to act as administrator to Carillion.
Ministers across Whitehall with responsibility for prisons, hospitals, schools and transport infrastructure have been drawing up contingency plans for the company’s collapse, including establishing new vehicles to take on Carillion contracts.
In a statement issued after the stock market closed on Friday, Carillion denied reports by the Press Association and the Financial Times that its lenders had rejected the company’s revised business plan.
It said it continued to hold “constructive discussions with a range of financial and other stakeholders regarding options to reduce debt and strengthen the group’s balance sheet”.
Carillion added that it was in dialogue about securing short-term financing “while the longer-term discussions are continuing”.
Government officials and regulators met on Friday to discuss how to safeguard the interests of more than 28,000 pension scheme members who could face cuts to retirement payments if Carillion does not survive.
Senior civil servants from the Cabinet Office attended an emergency summit that included representatives from The Pensions Regulator (TPR), Pension Protection Fund (PPF), Carillion’s pension trustees and an assortment of City advisers.
Carillion has a pension deficit of roughly £580m, although this figure would be expected to rise sharply if measured according to the cost of insuring its various retirement schemes on a full buyout basis.
The talks took place 24 hours after a meeting of ministers from across a multitude of Whitehall departments to discuss contingency plans for its collapse.
Sky News revealed last weekend that Carillion needs hundreds of millions of pounds within weeks to survive.
The rescue plan shown to lenders on Wednesday includes handing back some loss-making contracts, revising the terms of others and potentially accepting financial support from the Government if it cannot secure it from private sector sources.
Carillion’s large syndicate of lenders includes Barclays, HSBC and Santander UK, as well as a host of overseas firms.
A number of disposals aimed at raising cash, including that of its Canadian operations, are progressing more slowly than originally anticipated.
Its only asset sale since the crisis erupted has been to offload a portfolio of healthcare contracts to rival outsourcer Serco for £50m – against a broader forecast for disposal proceeds of £300m.
If it can survive in the short term, Carillion is also working on a plan to swap £1bn or more of its borrowings for new shares in the company, which is one of the Government’s most important infrastructure delivery partners.
Such a plan would leave its pension scheme, or the Pension Protection Fund, as a big shareholder.
Last week, the company was dealt a fresh blow when the City watchdog launched a probe into the “timeliness and content” of statements it made to the stock market about is financial position between December 2016 and July last year, when a massive profit warning sent its shares crashing by 75%.
Since then, the company has cleared out its executive team, including chief executive Richard Howson and finance director Zafar Khan.
Mr Howson was replaced on an interim basis by Keith Cochrane, the former Weir Group boss, with Andrew Davies due to arrive from Wates Group as his permanent successor on 22 January.
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Carillion reported a first-half pre-tax loss of £1.15bn in September, while it announced just before Christmas that its lenders had agreed to defer a test of its borrowing agreements from 31 December to 30 April.
The company declined to comment on Saturday, while a Government spokeswoman said “it should come as no surprise that we are carefully monitoring the situation while working to ensure our contingency plans are robust”.