Contractor Amey is in talks with Birmingham City Council to agree on a swift exit from its loss-making highways upkeep PFI deal.
Spanish giant Ferrovial is aiming to sell-off its UK support services business Amey but the 25-year PFI contract is a major obstacle.
According to a report in the Sunday Times, Amey is facing a £200m divorce bill to extricate itself from the contract.
Amey has been locked a five-year legal battle with the council over performance on its £2.7bn PFI deal.
It is reported Amey has not been paid for the work since the end of 2017 as the dispute rumbles on despite court rulings for a settlement.
A council spokesman said: “We continue to work with all stakeholders to achieve a consensual replacement of Amey as soon as practicable and with regard to ensuring continuity of service.”
The PFI deal has already cost Amey dearly. In 2017 annual account the firm was plunged into the red after writing off £208m on its highways contract with Birmingham City Council following the long-running payment dispute over quality of works.
Last year’s loss came on top of reported losses of £44m in 2016.
An Amey spokesman said: ‘The Birmingham contract is just one of hundreds of contracts across the UK which Amey operates successfully. It is no secret that the ongoing dispute in relation to the Birmingham Highways PFI deal remains a challenge.
‘That is why we are working closely with Birmingham City Council, Cabinet Office and a range of other stakeholders to reach a resolution which is in the best interests of all sides, and importantly delivers for the people of Birmingham.
“We will continue to meet our obligations under the contract for the remainder of its term to 2035, or until such time an alternative position is agreed.”