Banks rejected £50m three-year rescue plan for Connaught

Connaught’s banks put the company into administration yesterday after rejecting a three-year rescue plan that required a £50m cash injection within a month, a source close to the situation has told Building.

Most of the social housing firm collapsed into administration yesterday after talks between the company and its lenders about a rescue deal ended without resolution.

Connaught had run into financial difficulty earlier this year and after issuing a profit warning in June announced in July that its RBS-led group of banks would provide it with short-term funding of £15m to tide it over.

It is understood the £50m figure was split into between £30m and £40m for the social housing part of the business and £10m for the PLC and other parts of the firm outside its profitable compliance and environment arms.

The source said: “What it came down to in the end was that the lenders didn’t have confidence in the recovery plan. Quite a significant turnaround was needed and they baulked at putting in another £50m in the next month or so.”

Asked how flexible the banks had been during the talks, the source said: “It was basically like a brick wall.”

While the PLC and social housing arms of the business went into administration, the environment and compliance arms have been kept afloat for sale. One source close to the process said the company was seeking “several million pounds” for either business and a sale was expected within a fortnight.

It is understood trade players such as Kier, Mears, Morgan Sindall, Mitie and private-equity backed Kinetics are interested, alongside private equity firms rumoured to include 3i.

In relation to the poorer-performing social housing arm of the business, Building understands a group of interested parties are travelling to the Leeds office of administrator KMPG this afternoon to discuss a possible sale of all or parts of the business. A source told Building: “Several firms got the call and were told to get up to Leeds to talk about possible terms for what looks to be a fire sale.”

One source close to the process said KPMG would take offers as quickly as possible based on “cash on the table and certainty of funds”.

The list of firms believed to be interested include Mitie, Morgan Sindall, Kier, Balfour Beatty arm Mansell, Kinetics and Mears.

Three interested parties have told Building they would be interested in some of the contracts but not the whole business.”

A Connaught spokesman was unavailable for comment.