This is pretty typical for how large construction firms fail. If you’re slow / no paying vendors you’re way beyond just job borrow. The thing that surprises me the most here is that their surety holder is loaning them money.

Surety companies are not usually in the business of taking on risk, and usually are looking to make sure the surety they’re providing is fully collateralized. If the bond holder defaults they liquidate collateral to pay the bond. The fact that they’re only now identifying assets that could collateralize bonds is concerning, as is the fact that the surety firm is loaning them money. In theory a bond holder’s default shouldn’t financially impact the surety agent, and so there’s no incentive to lend money to an ailing firm that already can’t meet its financial obligations. But if you’ve been lazy or generous with collateral asset valuations, you might suddenly find that you have a bunch of undercollateralized obligations that you might need to pay on. So maybe you loan the construction company money to close a bunch of bonds and leave someone else holding the bag.

Either way, some companies recover, some companies go from “everything’s fine and solvent” to “bankruptcy” in a few days, and there’s a lot in the middle.