Connaught administration puts 10,000 jobs at risk
- 7 September 2010
- From the section Business
Nearly 10,000 jobs are at risk as the property and environmental services giant Connaught faces collapse.
The company, which specialises in social housing, said it was "in the process of appointing administrators".
The appointment is expected to be completed and announced formally on Wednesday morning.
Earlier, Connaught said it had tried to secure funding for its £220m debts, but had failed. Trading in Connaught's shares has now been suspended.
"The board is saddened to announce that it is in the process of appointing partners from KPMG as administrators of Connaught and its subsidiary, Connaught Partnerships, which comprises its social housing division," the company said.
It added that its other main subsidiaries, Connaught Compliance, National Britannia Holdings, Fountains and Connaught Environmental are not being placed into administration, and "will continue to trade normally".
Spending cuts impact
In an earlier statement, Connaught said it had had "continuing discussions with its lenders and other sources of finance with the objective of securing additional funding and a restructuring of the group's financing for the longer term."
"The group now believes that the availability of additional funds from its lenders will not be forthcoming and, whilst it remains in discussions with other parties, the ability to provide an adequate solution to the funding issues the group faces has become increasingly uncertain."
Connaught provides a wide range of services including property management for the public sector, and affordable housing projects.
It is also involved in waste management, cleaning and forestry services.
Connaught ran into serious difficulties over the past couple of months, after it emerged that a series of contracts would be loss making.
In June, it warned that public spending cuts would see its revenues fall by £80m this year, and it warned it would make an overall loss this year.
Measures announced in the government's Budget would affect 31 of its social housing contracts, Connaught said.
With creditors reluctant to lend the company more money, Royal Bank of Scotland agreed to give the company a short-term loan of £15m in an attempt to keep it going.
But ongoing negotiations to secure longer term finanacing have now broken down, and Connaught's bank creditors have decided instead to put the business into administration, under UK insolvency procedures.
"In spite of the severity of the economic crisis that engulfed the UK in 2008, few listed businesses have collapsed," commented the BBC's business editor Robert Peston.
"In that sense Connaught, a FTSE 250 company which at one stage had a market value of well over £500m, is unusual."
Shares in the Exeter-based company have lost about 90% of their value since late June.