What's going on?

Carillion, the huge construction and outsourcing firm that employs about 20,000 Brits, filed for �liquidation� (a form of bankruptcy) early Monday morning � virtually wiping out the value of its shares and putting thousands of British jobs at risk.

What does this mean?

Carillion works on a wide range of projects, from building the HS2 high-speed rail line to preparing food at UK hospitals; it also has big overseas operations. Its problems stem largely from it taking on lots of debt and then not charging enough for its work, leaving it unable to pay back borrowings.


After a series of warnings last year to investors that it was making far less money than anticipated, Carillion needed some urgent cash � but investors weren�t willing to pony up. Despite a last-ditch attempt to get the UK government to intervene, the company was forced to enter liquidation � meaning an administrator will step in and try to sell off its various businesses so that its lenders can recoup some of their losses. It�s likely that at least some jobs in Britain will be lost as new owners take control.

Why should I care?

The bigger picture: The UK government will pay to ensure that Carillion keeps servicing its government contracts.

One of the fears is that Carillion�s liquidation will lead to a disruption to the services it provides to UK government entities (like hospitals). Under the new arrangement, the government will provide funding during the liquidation process to that services continue uninterrupted � before, presumably, another company is able to take them on.


For markets: The stock is now worth virtually nothing.

PwC�s main priority will to be to ensure that Carillion�s lenders get paid back as much of what they are owed as possible. This will almost certainly leave nothing for the shareholders. That�s the law of the jungle: lenders (e.g. banks and bondholders) are senior to shareholders � the fundamental reason why it�s usually considered riskier to own shares rather than companies� bonds.