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

Connaught鈥檚 banks put the 拢660m-turnover company into administration this week after rejecting a three-year rescue plan that required a 拢50m cash injection within a month, 好色先生TV 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 拢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 拢15m to tide it over.

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

What it came down to was that the lenders didn鈥檛 have confidence in the recovery plan

A source close to the situation said: 鈥淲hat it came down to was that the lenders didn鈥檛 have confidence in the recovery plan. Quite a significant turnaround was needed and they baulked at putting in another 拢50m in the next month.鈥�

Asked how flexible the banks had been during the talks, the source said: 鈥淚t was basically like a brick wall.鈥�

While the plc and social housing arms of the business have gone into administration, the environment and compliance arms have been kept afloat.

好色先生TV understands the company is seeking 鈥渟everal million pounds鈥� 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.

鈥淪everal 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,鈥� a source told 好色先生TV.

It is understood that KPMG would take offers as quickly as possible based on 鈥渃ash on the table and certainty of funds鈥�.

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

Connaught was unavailable for comment.