Carillion hit varies across infrastructure funds

Carillion hit varies across infrastructure funds – on 15 January 2018, as Carillion entered liquidation, HICL Infrastructure announced that “a contingency plan has already been developed that specifically contemplated a scenario where Carillion enters liquidation and InfraRed has been working for some time with a number of potential replacement service providers. The contingency plan has been activated and the InfraRed Asset Management Team is working in conjunction with all stakeholders to ensure continuity of service provision at the relevant PPP projects.” Carillion accounted for 10 of PPP’s projects, accounting for 14% of the portfolio by value.

£50m hit to HICL NAV

By 26 January, HICL was announcing a £50m hit to its NAV saying “Responsibility for securing replacement contractors sits with PPP project companies, and the associated risks fall in the first instance upon investors such as HICL. Using the information currently available, the Investment Adviser has developed a preliminary assessment of the financial impact of Carillion’s liquidation on the company. This has been discussed with, and reviewed by, the Board. Based on current information, the impact is estimated at approximately GBP50m of NAV (equivalent to 2.8p of NAV per share, or 1.8% of NAV per share as at 30 September 2017), which is incremental to a provision of GBP9.4m that was taken at the time of the company’s interim results in respect of counterparty exposure.”

“This assessment incorporates assumptions around the expected costs of the transition phase; the anticipated timing and costs of implementing long-term solutions; delays to distributions at project level; and a view on the possible impact on the valuation of these projects as at 31 March 2018. The company will further update shareholders at the time of the Annual Results, unless the Investment Adviser’s assessment of the financial impact changes materially in the interim in light of new information.”

£50m is a chunky amount of money. The situation at other listed infrastructure companies does not seem to be anywhere near as bad.

INPP takes £1.5m hit

International Public Partnerships said “Since 15 January the company has made good progress on the transition of projects managed by Carillion Services Limited (‘Carillion FM’) to alternative providers and continues to expect this to occur on similar terms to its existing contracts.   While the company expects to incur modest transaction costs it does not currently anticipate any significant consequential valuation or cashflow impact.  While such transfers are not yet completed (and delay in or failure to complete such transfers might change this estimate) the company currently anticipates that the impact of these items is likely to be less than GBP1.5m (before any offset applicable in respect of funds held by the company that are owed to Carillion). 

INPP advises that facilities management services are provided by Carillion FM to c.3% (by investment fair value) of the company’s portfolio.  A GBP1.5m impact on net asset valuation equates to approximately one tenth of a penny per share.”

No material impact at JLIF

On 29 January 2018, John Laing Infrastructure said “John Laing Capital Management Ltd, the company’s Investment Adviser, continues to work on implementing its contingency plans to replace Carillion as Facilities Management provider on the 9 JLIF projects and expects this to occur on similar terms to the existing contracts within the projects.  The Investment Adviser anticipates that there will be minimal service disruption, however initially expects additional advisory and transaction costs in respect of the appointment of replacement facilities managers to cost approximately GBP3 million in aggregate. 

JLIF reiterates that it has no projects currently in construction where Carillion is the contractor.  JLIF owns one project where Carillion is still liable for any construction defects found on the project, with the construction period having completed over 10 years ago.  JLIF reiterates that a recently completed routine defects survey has not highlighted any significant areas of concern.

The Investment Adviser believes that the compulsory liquidation of Carillion should have no material impact on the Company ”

BBGI said on 16 January 2018 that it had no exposure to Carillion.

BBGI / HICL / INPP / JLIF : Carillion hit varies across infrastructure funds