Carillion PLC (LON:CLLN) shares dropped by almost 30% in late afternoon trading on reports that its lenders have rejected the embattled construction firm's business plan, and that it has lined up an accountancy firm as a standby administrator.
Carillion this evening dismissed reports lenders have rejected a critical restructuring plan.
It said the firm remained in constructive dialogue about short term financing while "longer term discussions are continuing".
It comes as the Government, pension authorities and stakeholders met on Friday in an attempt to thrash out a rescue package for the firm which would help it avoid collapse.
"Suggestions that Carillion's business plan has been rejected by stakeholders are incorrect", a spokesperson said.
Carillion is a major supplier to the Government and key contractor in the first phase of building the £56 billion HS2 rail line, but has seen its share price plunge almost 80% in the past six months after making a string of profit warnings and breaching its financial covenants.
The Wolverhampton-based group is the second-largest supplier to Network Rail and maintains approximately half of the UK's prisons as well as roughly 50,000 homes for the Ministry of Defence.
The general secretary of the RMT rail union, Mick Cash, said Carillion's workers were "not responsible for the crisis".
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In addition to its rail operations, Carillion also manages almost 900 schools, provides services to the NHS and works with National Grid.
Gail Cartmail, assistant general secretary of trade union Unite, which represents more than 1,000 workers at the company, said the government should consider bringing contracts back in-house.
The Press Association understands that a business plan tabled by the group on Wednesday was knocked back because it failed to present a solid proposition for restructuring the business.
The government confirmed ministers met yesterday to discuss Carillion's future and were "monitoring the situation closely".
Senior Cabinet ministers thought to include Business Secretary Greg Clark, Transport Minister Jo Johnson and Justice Minister Rory Stewart, were called to a meeting on Thursday to discuss Carillion's future, in a sign that the Government is preparing for the outsourcer's collapse after revealing earlier this week that it had drawn up contingency plans.
Carillion is holding crisis talks with United Kingdom government representatives on Friday, which Sky News said were aimed at safeguarding the more than 28,000 pension scheme members who face potential cuts to retirement payments should Carillion fail. "It would be inappropriate for us to comment on any individual contractor's internal financial governance".
Last week, the company was dealt a fresh blow when the City watchdog launched a probe into the "timeliness and content" of statements it made to the stock market about is financial position between December 2016 and July past year, when a massive profit warning sent its shares crashing by 75%.