UK government steps in as Carillion forced into compulsory liquidation

Carillion officials made a final rescue appeal to its lending banks on Sunday night after the government refused to rescue the struggling construction and services company. (Reuters)
Updated 15 January 2018
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UK government steps in as Carillion forced into compulsory liquidation

LONDON: Britain’s Carillion collapsed on Monday after its banks lost faith in the construction and services company, throwing hundreds of major projects into doubt and forcing the government to step in to guarantee vital public services.
Carillion was forced into compulsory liquidation after costly contract delays and a slump in new business left it at the mercy of its lenders and battling a ballooning debt pile.
The demise of the 200-year-old business poses a major headache for Theresa May’s government which has employed Carillion to work on 450 projects including the building and maintenance of hospitals prisons, defense sites and the country’s new superfast rail line.
“In recent days we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision,” Chairman Philip Green said.
“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.”
Employing 43,000 people around the world, including 20,000 in Britain, Carillion has been fighting for survival since July when it revealed it was losing cash on several projects and had written down the value of its contract book by £845 million.
With banks refusing to accept the group’s latest attempt to restructure, May’s senior ministers met around the clock in recent days, under pressure from the opposition Labour Party and unions not to use taxpayer money to prop up the failing company.
Carillion has debt and liabilities of £1.5 billion with creditors that include banks RBS, Santander UK, HSBC and others. It has a pension deficit, included within that figure, of £580 million.
David Lidington, the minister in charge of the Cabinet Office which oversees the running of government, said his first priority was to ensure that public services continued. He urged the company’s staff to continue to work and said the government would pay their salaries.
Some contracts handled by Carillion would go to alternative providers, he added.
The company’s collapse comes at a difficult time for the government as it negotiates its exit from the European Union.
“It is regrettable that Carillion has not been able to find suitable financing options with its lenders but taxpayers cannot be expected to bail out a private sector company,” Lidington said in a statement.
“For clarity, all employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.”
Labour’s business spokeswoman Rebecca Long-Bailey called for a full investigation as to why the government continued to award Carillion contracts when it was clear it was in trouble.
“This company issued three profit warnings in the last six months yet despite those profit warnings the government continued to award government contracts to this company,” she told BBC TV.
“We’re ... asking for a full investigation into the government conduct of this matter.”
Spun out of Tarmac nearly 20 years ago and having bought Alfred McAlpine in 2008, Carillion has worked on key construction projects including London’s Royal Opera House, the Suez Canal road tunnel and Toronto’s Union Station.
In July last year it won contracts to build Britain’s new High Speed 2 rail line, a major project that will better connect London with the north of England.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 18 March 2019
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”