PSBP Midlands Ltd was selected under the Priority Schools Building Programme to rebuild and refurbish eight schools in the Midlands. The company subcontracted Carillion Construction Ltd (CCL) to undertake the construction work, and Carillion (AMBS) Ltd to deliver the project. Following the failure of Carillion, replacement service providers were appointed. However, due to defects in the work carried out in the original work and the exceptional costs arising from the insolvency of the Carillion group, PSBP Midlands experienced a funding shortfall which led to a default under its credit agreement.
Despite discussions between all stakeholders, no solvent solution appeared achievable, and the lenders appointed FRP as Administrative Receivers to the company. The team liaised with the businesses providing services to PSBP Midlands (such as construction and demolition) to ensure that there was minimal disruption. The Administrative Receivers also liaised with key stakeholders including the Department for Education (DfE) – the company’s client – as well as the special managers of Carillion, and equity sponsors Equitix and IUK Investments Ltd (part of HM Treasury). This period of stabilisation gave the lenders time to assess the project and the funding needed to see it through to completion.
The lenders reached a settlement with the DfE regarding historic disputes that arose as a result of the failure of Carillion, and agreed to recapitalise the company. This allowed the Administrative Receivers to resign, and the project to be delivered.
This period of stabilisation gave the lenders time to assess the project and the funding needed to see it through to completion.Geoff Rowley Restructuring Advisory