Skip to main content

Workers take down a sign showing the name of liquidated British construction and outsourcing group Carillion on a building site in the City of London on Jan. 23, 2017.DANIEL SORABJI/AFP / Getty Images

The Canadian division of the troubled British construction giant Carillion PLC has filed for bankruptcy protection in Ontario, putting 7,500 jobs at risk and jeopardizing projects at dozens of hospitals, hotels and airports across the country.

Carillion PLC filed for liquidation in London on Jan. 15 after failing to reach a refinancing package and piling up debts of £1.2-billion ($2.1-billion). The company had 43,000 employees in Britain, the Middle East and Canada and it held more than 400 government contracts in Britain. The company's collapse has also raised difficult questions for the government about the value and risks of public-private partnerships.

Carillion Canada tried to carry on as normal at first, announcing last week that the British liquidation had not affected its operations. But by Thursday it was clear the company faced a growing financial crisis and it filed for bankruptcy protection.

Court documents show it owes around $750-million and has just enough cash to make it to Feb. 17. The company said it planned to use the court protection to arrange new financing and explore the sale of some assets. "Given a reasonable period of time to reorganize their financial affairs [under court protection], the management is optimistic that the overall value of the [company's] business will likely be enhanced to the benefit of all of their stakeholders," chief financial officer Elizabeth Reynolds said in an affidavit.

Carillion Canada is a major player in the Canadian construction, maintenance and services sector. Like its British parent, the Canadian division has been involved in a wide variety of government projects and holds numerous public contracts. It currently provides a range of services to five hospitals in Ontario, one in Saskatchewan and one in the Northwest Territories. It also maintains 40,000 kilometres of highways in Alberta and Ontario; and it has been involved in dozens of public construction projects, including the continuing redevelopment of Toronto's Union Station. It also operates in the mining and energy sector, and builds power lines.

However, court filings indicate that it had been under financial pressure and that the British parent had been trying to sell off some of the Canadian operations to raise badly needed cash.

Court filings show Carillion Canada lost $6.5-million in 2016, compared with a profit of $13.1-million in 2015. Revenue had risen to $743-million from $628.9-million.

Although Carillion PLC had been facing a financial crunch for months, the liquidation clearly caught the Canadian division off guard and left it financially stranded. According to Ms. Reynolds, Carillion Canada was almost completely reliant on its parent for financial arrangements and it handed over all of its cash to the London headquarters on a daily basis. The parent's final cash sweep was on Jan. 12, just three days before it filed for liquidation. It took $28-million that day and Carillion had no way of retrieving the money after Jan. 15. The Canadian division was also immediately cut off from a $30-million operating line of credit that it had been able to access at HSBC under Carillion PLC's overall lending facilities. And to make matters worse, the Bank of Montreal and Bank of Nova Scotia froze Carillion Canada's corporate credit cards, leaving the company strapped.

All of those events "resulted in immediate liquidity challenges," Ms. Reynolds said, and jeopardized "Carillion Canada Group's ability to continue operations."

The company has managed to raise $14-million from the sale of its interest in the Bouchier Group, a business based in Fort McMurray, Alta. that provides services to companies operating in the oil sands. It's also hoping to speed up payments from contractors to raise some additional cash.

In a statement Thursday it added that some of its operations, including the public-private partnerships, are not part of the court filing but will be under a limited form of court protection "to ensure the orderly continuation of their day-to-day operations." And it added: "It is expected to be business as usual for all Canadian Carillion [divisions] as they continue to operate under the protection of the [court]."

Follow Paul Waldie on Twitter: @PwaldieGLOBEOpens in a new window

Report an error

Editorial code of conduct

Tickers mentioned in this story

Your Globe

Build your personal news feed

Follow the author of this article:

Check Following for new articles

Interact with The Globe