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CARILLION: THE AFTERMATH

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©Getty

05 February 2018 Herpreet Kaur Grewal

newsdesk@fm-world.co.uk

Two months on from Carillion's collapse, the fallout continues, reports Herpreet Kaur Grewal.

Almost two months after Carillion collapsed, the extent of the fallout is still being felt. During February, larger players came forward to salvage some of the former support services and construction giant’s contracts, and the former Carillion directors were grilled by MPs.


As FM World went to press, Engie had reached an agreement to acquire long-term heating and building maintenance contracts with the Northern Ireland Housing Executive that had been previously operated by Carillion Energy Services Ltd. And Mitie Group plc had been awarded the FM services contract at Heathrow Terminal 5 that Carillion had been carrying out.


In total, to date 7,610 jobs threatened by the collapse have been saved and 1,141 jobs have been made redundant through the liquidation.


Earlier in February, Brookfield Global Integrated Solutions (BGIS), a Canadian global real estate and facilities management services provider, entered into an agreement with the special manager for the official receiver to buy a large portfolio of Carillion FM contracts in the UK.


Under the terms of the transaction, BGIS will acquire a portfolio of deals for delivery of services in the hospital, education, justice, transport and emergency services markets.


The transaction is subject to closing conditions, and is expected to close in the first quarter of 2018.


More than 2,500 Carillion employees will join the BGIS team upon closing, according to Gord Hicks, chief executive officer of BGIS.


Hicks said: “This deal provides continuity of services for a large number of customers providing critical infrastructure within the UK market. Our team is looking forward to engaging both customers and employees in the days ahead to effect the transaction and ensure a smooth transition.”


Mark Marquis, chief commercial officer at BGIS, added that the company had “a long-established track record of serving federal and regional government as well as large corporate clients and onboarding complex, multi-site contracts around the world”.


He added: “With this transaction, we look forward to building a large presence in the UK facilities management market and providing customers with the same industry-leading service and capabilities that we do throughout the globe.”


In January 2016, BGIS said it would acquire the remaining 50 per cent of the Canadian and Australian FM businesses from Johnson Controls Inc. Both companies previously held the businesses in a joint venture arrangement.


Another Canadian firm, the insurance company Fairfax Financial Holdings, has agreed to acquire certain assets of Carillion Canada Holdings Incorporated. 


Fairfax will also assume some liabilities related to Carillion’s Canadian operations. More than 4,500 members of Carillion Canada’s team will be joining Fairfax.

Fairfax will acquire the services carried on by Carillion in Canada relating to facilities management of airports, commercial and retail properties, defence facilities, select healthcare facilities and on behalf of oil, gas and mining clients, including under the Outland brand. 


The deal is subject to customary closing conditions, including approval by the Ontario Superior Court of Justice in Carillion Canada’s proceedings under the Companies’ Creditors Arrangement Act (Canada), applicable regulatory approvals and due diligence by Fairfax, and is expected to close in the first quarter of 2018.


Almost two months after Carillion collapsed, the extent of the fallout is still being felt. During February, larger players came forward to salvage some of the former support services and construction giant’s contracts, and the former Carillion directors were grilled by MPs.


As FM World went to press, Engie had reached an agreement to acquire long-term heating and building maintenance contracts with the Northern Ireland Housing Executive that had been previously operated by Carillion Energy Services Ltd. And Mitie Group plc had been awarded the FM services contract at Heathrow Terminal 5 that Carillion had been carrying out.


In total, to date 7,610 jobs threatened by the collapse have been saved and 1,141 jobs have been made redundant through the liquidation.


Earlier in February, Brookfield Global Integrated Solutions (BGIS), a Canadian global real estate and facilities management services provider, entered into an agreement with the special manager for the official receiver to buy a large portfolio of Carillion FM contracts in the UK.


Under the terms of the transaction, BGIS will acquire a portfolio of deals for delivery of services in the hospital, education, justice, transport and emergency services markets.


The transaction is subject to closing conditions, and is expected to close in the first quarter of 2018.


More than 2,500 Carillion employees will join the BGIS team upon closing, according to Gord Hicks, chief executive officer of BGIS.


Hicks said: “This deal provides continuity of services for a large number of customers providing critical infrastructure within the UK market. Our team is looking forward to engaging both customers and employees in the days ahead to effect the transaction and ensure a smooth transition.”


Mark Marquis, chief commercial officer at BGIS, added that the company had “a long-established track record of serving federal and regional government as well as large corporate clients and onboarding complex, multi-site contracts around the world”.


He added: “With this transaction, we look forward to building a large presence in the UK facilities management market and providing customers with the same industry-leading service and capabilities that we do throughout the globe.”


In January 2016, BGIS said it would acquire the remaining 50 per cent of the Canadian and Australian FM businesses from Johnson Controls Inc. Both companies previously held the businesses in a joint venture arrangement.


Another Canadian firm, the insurance company Fairfax Financial Holdings, has agreed to acquire certain assets of Carillion Canada Holdings Incorporated. 


Fairfax will also assume some liabilities related to Carillion’s Canadian operations. More than 4,500 members of Carillion Canada’s team will be joining Fairfax.

Fairfax will acquire the services carried on by Carillion in Canada relating to facilities management of airports, commercial and retail properties, defence facilities, select healthcare facilities and on behalf of oil, gas and mining clients, including under the Outland brand. 


The deal is subject to customary closing conditions, including approval by the Ontario Superior Court of Justice in Carillion Canada’s proceedings under the Companies’ Creditors Arrangement Act (Canada), applicable regulatory approvals and due diligence by Fairfax, and is expected to close in the first quarter of 2018.



Royal Liverpool Hospital 

FM staff at the Royal Liverpool Hospital left uncertain of their future after Carillion’s collapse will be transferred to a new company.


The Hospital Company (Liverpool) is a private sector consortium established to deliver the new Royal Liverpool University Hospital and is responsible for ensuring that it is completed. Carillion had been contracted to carry out the construction.


A spokesman for the Royal Liverpool and Broadgreen University Hospitals NHS Trust said the trust’s “primary concern is for staff”. He added that the Hospital Company (Liverpool) has “plans for a new company to be established that facilities management workers will be transferred to”.


He added: “In the meantime, the Hospital Company (Liverpool) is paying PwC weekly so that staff and subcontractors continue to be paid by PwC and services continue to be delivered at our hospitals.


“We have also reassured suppliers and the supply chain that they will be paid to ensure service delivery.


“The trust is liaising with the Hospital Company (Liverpool) and is keen that a new company is established as soon as possible. However, these talks are complex and may take some time,” he added.


But in mid-February, the country’s largest union expressed concerns that Aidan Kehoe, CEO at the Royal Liverpool Hospital, had refused to meet the union about job losses among maintenance staff.


Unite’s regional officer Keith Hutson said: “These workers are in an employment limbo through no fault of their own – they are the victims of the feral capitalism that was the cause of Carillion’s dramatic collapse.


“The fact that highly paid NHS boss Aidan Kehoe is unable to meet Unite to discuss the future of this group of hardworking maintenance staff is a disgrace and a snub.


“These workers are responsible for the daily maintenance of the trust’s buildings and all the health and safety implications this entails. They are separate from the new build at the Royal Liverpool Hospital, which is unlikely to be finished this year. The mature and sensible way forward would be for the trust to take these jobs back in-house.”


But the trust’s spokesman said: “We haven’t refused to meet with Unite and the chief executive is meeting with various trade unions, including Unite, later this month. Facilities management staff have had the opportunity to talk to the chief executive directly at our monthly face-to-face brief with staff and we are doing everything we can to ensure they are kept up to date.”



MPs conduct post-mortem

In other public sector quarters, the official receiver said 4,418 cleaning and catering jobs on former prison and defence bases contracts would be transferred, safeguarding the employment of these staff. But about 59 construction workers would be made redundant.


Serco has also negotiated a price that will save it just over £20m on its acquisition of a portfolio of selected UK health FM contracts from Carillion, for which it had previously agreed to pay £50.1 million. The support services firm said it had revised its business purchase agreement and if all contracts are transferred under this agreement the amount payable would be £29.7m. The agreement covers substantially all of the assets that were the subject of the previous agreement. 


The inquiry into the collapse got under way in February. The Work and Pensions and BEIS Committees have launched the joint inquiry to investigate how Carillion had left “a mountain of debt, potential job losses in the thousands, a giant pension deficit and hundreds of millions of pounds of unfinished public contracts with vast ongoing costs to the UK taxpayer”. 


The committees are looking into how a company that was signed off by KPMG as a going concern in spring 2017 could crash into liquidation with a reported £5 billion of liabilities and just £29m left in cash less than a year later.


Carillion’s former chairman Phillip Green told the panel of MPs that its debt level was partly down to a big acquisition the firm undertook in 2011. He told MPs that three main reasons led to the group’s demise: the major acquisition, four major contracts starting to fail in 2017, and the failure to get a funding deal from banks and government in 2018.


In 2011 FM World reported on Carillion’s acquisition of supplier of heating and renewable energy services, Eaga – likely to be the one to which Green referred – whose share price “took something of a hit [in 2010] as government cuts hampered its business, especially the delivery of the Warm Front programme”.


Green said he took “full responsibility” for the company’s collapse and was “very, very sorry”.


Former finance director Zafar Khan told MPs: “The pension deficit had grown because we weren’t putting in a sufficient level of funding.’


Former CEO Keith Cochrane said the business asked the government for £160m of funding over four months, which they believed could save the company in the long term, but it was denied. Both Cochrane and Richard Howson, a previous CEO, said they had not got the payment on a £200m World Cup 2022 contract. According to news reports, this was denied by the Qatari company involved.FM staff at the Royal Liverpool Hospital left uncertain of their future after Carillion’s collapse will be transferred to a new company.


The Hospital Company (Liverpool) is a private sector consortium established to deliver the new Royal Liverpool University Hospital and is responsible for ensuring that it is completed. Carillion had been contracted to carry out the construction.


A spokesman for the Royal Liverpool and Broadgreen University Hospitals NHS Trust said the trust’s “primary concern is for staff”. He added that the Hospital Company (Liverpool) has “plans for a new company to be established that facilities management workers will be transferred to”.


He added: “In the meantime, the Hospital Company (Liverpool) is paying PwC weekly so that staff and subcontractors continue to be paid by PwC and services continue to be delivered at our hospitals.


“We have also reassured suppliers and the supply chain that they will be paid to ensure service delivery.


“The trust is liaising with the Hospital Company (Liverpool) and is keen that a new company is established as soon as possible. However, these talks are complex and may take some time,” he added.


But in mid-February, the country’s largest union expressed concerns that Aidan Kehoe, CEO at the Royal Liverpool Hospital, had refused to meet the union about job losses among maintenance staff.


Unite’s regional officer Keith Hutson said: “These workers are in an employment limbo through no fault of their own – they are the victims of the feral capitalism that was the cause of Carillion’s dramatic collapse.


“The fact that highly paid NHS boss Aidan Kehoe is unable to meet Unite to discuss the future of this group of hardworking maintenance staff is a disgrace and a snub.


“These workers are responsible for the daily maintenance of the trust’s buildings and all the health and safety implications this entails. They are separate from the new build at the Royal Liverpool Hospital, which is unlikely to be finished this year. The mature and sensible way forward would be for the trust to take these jobs back in-house.”


But the trust’s spokesman said: “We haven’t refused to meet with Unite and the chief executive is meeting with various trade unions, including Unite, later this month. Facilities management staff have had the opportunity to talk to the chief executive directly at our monthly face-to-face brief with staff and we are doing everything we can to ensure they are kept up to date.”



MPs conduct post-mortem

In other public sector quarters, the official receiver said 4,418 cleaning and catering jobs on former prison and defence bases contracts would be transferred, safeguarding the employment of these staff. But about 59 construction workers would be made redundant.


Serco has also negotiated a price that will save it just over £20m on its acquisition of a portfolio of selected UK health FM contracts from Carillion, for which it had previously agreed to pay £50.1 million. The support services firm said it had revised its business purchase agreement and if all contracts are transferred under this agreement the amount payable would be £29.7m. The agreement covers substantially all of the assets that were the subject of the previous agreement. 


The inquiry into the collapse got under way in February. The Work and Pensions and BEIS Committees have launched the joint inquiry to investigate how Carillion had left “a mountain of debt, potential job losses in the thousands, a giant pension deficit and hundreds of millions of pounds of unfinished public contracts with vast ongoing costs to the UK taxpayer”. 


The committees are looking into how a company that was signed off by KPMG as a going concern in spring 2017 could crash into liquidation with a reported £5 billion of liabilities and just £29m left in cash less than a year later.


Carillion’s former chairman Phillip Green told the panel of MPs that its debt level was partly down to a big acquisition the firm undertook in 2011. He told MPs that three main reasons led to the group’s demise: the major acquisition, four major contracts starting to fail in 2017, and the failure to get a funding deal from banks and government in 2018.


In 2011 FM World reported on Carillion’s acquisition of supplier of heating and renewable energy services, Eaga – likely to be the one to which Green referred – whose share price “took something of a hit [in 2010] as government cuts hampered its business, especially the delivery of the Warm Front programme”.


Green said he took “full responsibility” for the company’s collapse and was “very, very sorry”.


Former finance director Zafar Khan told MPs: “The pension deficit had grown because we weren’t putting in a sufficient level of funding.’


Former CEO Keith Cochrane said the business asked the government for £160m of funding over four months, which they believed could save the company in the long term, but it was denied. Both Cochrane and Richard Howson, a previous CEO, said they had not got the payment on a £200m World Cup 2022 contract. According to news reports, this was denied by the Qatari company involved.