Administrator summons interested parties to fire sale talks after social housing firm collapses

Connaught’s banks put the £660m-turnover company into administration this week after rejecting a three-year rescue plan that required a £50m cash injection within a month, Building has learned.

The social housing division of Connaught entered administration on Tuesday after rescue talks between the company and its lenders ended without resolution.

Connaught, which has debts of £220m and employs 10,000 people, ran into difficulty earlier this year. After issuing a profit warning in June, it announced in July that its RBS-led backers would provide short-term funding of £15m to tide it over.

Of the £50m figure, £30m to £40m was earmarked for the social housing part of the business, leaving £10m for the plc and other parts outside its profitable compliance and environment arms.

What it came down to was that the lenders didn’t have confidence in the recovery plan

A source close to the situation said: “What it came down to 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.”

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 have gone into administration, the environment and compliance arms have been kept afloat.

Building understands the company is seeking “several million pounds” for either business and a sale is expected within a fortnight.

Players such as Kier, Mears, Morgan Sindall, Mitie and private-equity backed Kinetics are believed to be interested in these arms, as is private equity firm 3i.

A group of parties interested in elements of the social housing business travelled to the Leeds office of administrator KMPG on Wednesday afternoon.

“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,” a source told Building.

It is understood that KPMG would take offers as quickly as possible based on “cash on the table and certainty of funds”.

Firms believed to be interested in the social housing division include Mitie, Morgan Sindall, Kier, Mansell, Kinetics and Mears.

Connaught was unavailable for comment.