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You can find the current article at its original source at https://www.theguardian.com/business/2018/may/14/carillion-displayed-utter-contempt-for-suppliers-frank-field
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| Carillion displayed utter contempt for suppliers – Frank Field | Carillion displayed utter contempt for suppliers – Frank Field |
| (30 days later) | |
| Carillion used suppliers to “prop up a failing business model” and conceal true levels of debt, say MPs investigating the failed government contractor. | Carillion used suppliers to “prop up a failing business model” and conceal true levels of debt, say MPs investigating the failed government contractor. |
| The parliamentary inquiry into the collapse of a company that provided a host of vital public services, including catering in schools, prison maintenance and construction of new NHS hospitals will conclude on Wednesday with the publication of the MPs’ final report. It is expected to name and shame those responsible for the failure of the listed company, which had a UK staff of nearly 20,000 when it crashed into administration in January. | The parliamentary inquiry into the collapse of a company that provided a host of vital public services, including catering in schools, prison maintenance and construction of new NHS hospitals will conclude on Wednesday with the publication of the MPs’ final report. It is expected to name and shame those responsible for the failure of the listed company, which had a UK staff of nearly 20,000 when it crashed into administration in January. |
| Carillion bosses displayed 'greed on stilts', MPs claim | Carillion bosses displayed 'greed on stilts', MPs claim |
| In a taste of what is to come, the work and pensions committee chairman, Frank Field, said: “Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy. | In a taste of what is to come, the work and pensions committee chairman, Frank Field, said: “Carillion displayed utter contempt for its suppliers, many of them the small businesses that are the lifeblood of the UK’s economy. |
| “The company used its suppliers as a line of credit to shore up its fragile balance sheet, then in another of its accounting tricks ‘reclassified’ this borrowing to hide the true extent of its massive debt.” | “The company used its suppliers as a line of credit to shore up its fragile balance sheet, then in another of its accounting tricks ‘reclassified’ this borrowing to hide the true extent of its massive debt.” |
| Field’s comments came as the joint inquiry with the business, energy and industrial strategy committee, published evidence from Santander, the bank that operated the company’s early payment facility. Its loss was one of the events Carillion’s directors attempted to blame for its eventual failure. | Field’s comments came as the joint inquiry with the business, energy and industrial strategy committee, published evidence from Santander, the bank that operated the company’s early payment facility. Its loss was one of the events Carillion’s directors attempted to blame for its eventual failure. |
| However, in the letter the Santander chief risk officer, Patricia Halliday, sets out why the bank pulled the plug on the facility in December 2017. In the wake of a profit warning that summer, Halliday said Santander had worked with other banks on a refinancing plan contingent on the company making disposals. | However, in the letter the Santander chief risk officer, Patricia Halliday, sets out why the bank pulled the plug on the facility in December 2017. In the wake of a profit warning that summer, Halliday said Santander had worked with other banks on a refinancing plan contingent on the company making disposals. |
| “Despite the provision of these new money commitments and continued close engagement with Carillion into December, the envisaged disposals did not take place and the detailed business and restructuring plans originally expected to be received by 8 December were further delayed,” Halliday writes. “This series of events … further undermined Santander’s confidence in Carillion’s financial position. | “Despite the provision of these new money commitments and continued close engagement with Carillion into December, the envisaged disposals did not take place and the detailed business and restructuring plans originally expected to be received by 8 December were further delayed,” Halliday writes. “This series of events … further undermined Santander’s confidence in Carillion’s financial position. |
| “In light of the lack of progress with the restructuring plan, Santander took the decision to terminate the … facility,” she adds. | “In light of the lack of progress with the restructuring plan, Santander took the decision to terminate the … facility,” she adds. |
| The early payment facility, which is also referred to as supply chain financing, allowed suppliers to be paid earlier – but at the price of taking a discounted payment. But despite being signatories of the prompt payment code, Carillion were “notorious late payers” who forced standard payment terms of 120 days on its suppliers, say the MPs. | The early payment facility, which is also referred to as supply chain financing, allowed suppliers to be paid earlier – but at the price of taking a discounted payment. But despite being signatories of the prompt payment code, Carillion were “notorious late payers” who forced standard payment terms of 120 days on its suppliers, say the MPs. |
| Moody’s and Standard & Poor’s, the credit ratings agencies, have argued that Carillion’s way of accounting for the early payment facility concealed the true scale of the company’s debts. The ratings agencies assert the facility – which was effectively being used as a credit line – should have been added to its other bank borrowings. Instead Carillion chose to present it as liabilities to “other creditors”, meaning nearly £500m was misclassified as a result, they claim. | Moody’s and Standard & Poor’s, the credit ratings agencies, have argued that Carillion’s way of accounting for the early payment facility concealed the true scale of the company’s debts. The ratings agencies assert the facility – which was effectively being used as a credit line – should have been added to its other bank borrowings. Instead Carillion chose to present it as liabilities to “other creditors”, meaning nearly £500m was misclassified as a result, they claim. |
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