Harland & Wolff, the Titanic’s shipbuilder, stumbled on the edge of bankruptcy

Harland & Wolff’s two giant yellow gantry-cranes, Samson and Goliath have dominated Belfast’s skyline for the past half century. “You’ll know when you see them,” Ernie Morrison said, who worked at the Titanic shipyard from 1959 to 2000. He was drinking a pint in a working men’s bar.

Irony is evident in the names given to these two cranes, which are so symbolic of the yard that now stands on the verge of financial ruin. Both cranes are named after legendary strongmen who had inherent weaknesses which led to their downfall. Samson’s hair and Goliath’s arrogance brought them down, but Harland & Wolff has been doomed to a crisis caused by a mix of external events and strategic blunders, as well as murky accusations.

said this weekend the company was days away from filing for bankruptcy, putting 1,300 job at risk.

Arun Raman’s abrupt resignation last week has a new twist. He is considering suing for constructive dismissal as well as racial bias.

Many people in east Belfast will likely shrug their shoulders at the latest troubles of Harland & Wolff.

Locals tell you the shipyard is on the brink of bankruptcy for many decades. The shipyard’s workforce fluctuated from 20,000 to more than 20,000 in the 1940s. It was always one contract away of extinction, even when it employed as many as 20,000 workers.

Harland & Wolff has only recently flirted with bankruptcy. In 2019, after the bankruptcy of its former owner, Norway’s Dolphin Drilling in 2019, the board was forced to hire administrators. Harland & Wolff’s headcount had dropped to 130 at that time.

InfraStrata was able to save the day. The energy company is based in London and run by John Wood, an experienced engineer. InfraStrata’s main asset was Islandmagee, an underground gas storage facility off the coast County Antrim. Wood, who paid £6 million for the opportunity to step in, planned to retain around 80 employees and grow the workforce up to several hundred.

InfraStrata renamed itself Harland & Wolff two years later. This was a clever PR move made just a few weeks before Boris Johnson unveiled a National Shipbuilding Strategy. Wood, the chief executive of InfraStrata, saw an opportunity to capitalize on Johnson’s desire for British-built ships to strengthen the Royal Navy.

He wanted to free himself from the shackles of BAE Systems, Babcock and other companies. However, substantial funding will be needed. Harland & Wolff borrowed $35 million in 2021 from New York-based fund Riverstone, but more funding was needed.

Wood’s plan appeared to be working in November 2022, when he was selected as the preferred bidder on a £1.6-billion contract for three solid support vessels. Wood stated at the time that it was time to give taxpayers value for their money.

Harland & Wolff, a London-based fund of hedge funds, announced that it had agreed to refinance the Riverstone loan for £100 million.

The Unite and GMB unions provide an update on the progress made by workers during a previous crisis in 2019.

In December of that year, the company announced that it was in discussions to increase the loan facility to PS200million and expected to sign it in the first quarter of 2023. The UK Export Finance Guarantee (UKEF) would back this deal. The company stated in March 2023 that the refinancing “would close early Q2 of 2023”. It revealed in June 2023 that it had made significant advances on its group refinancing. The transaction is now expected to “close early autumn”.

Harland & Wolff informed investors in September that the talks had reached an “advanced phase” and were expected to be completed by 2023.

Wood and his team celebrated a breakthrough on December 28, 2023. Harland & Wolff published a stock market announcement stating they had “sought permission from ministers to advance negotiations”.

Accountancy firm EY, flanked by Deloitte’s financial advisors, was brought in to review the agreement, in anticipation of what Wood believed would be the rubber stamping of the agreement in spring 2024, an arrangement that had been in the works for nearly 18 months.

As the weeks and even months passed, there were growing fears of a Whitehall backslide. These fears were realised when officials and ministers said they would not approve a deal which put the money of UK taxpayers at risk in the last days of the Conservative Government.

In July, the new Labour Government announced that an export guarantee was not going to be available.

Wood, whose money was running out, was made to leave the company as a condition for Riverstone to inject another $25 million in the business. The US fund owes $175 million, or PS133 million. Russell Downs was parachuted into Harland & Wolff as interim chairman. He is a turnaround specialist who managed parts of Lehman Brothers’ bankruptcy at PwC. Alan Fort, a former PwC Partner and turnaround expert, was also brought in to help save the business.

The accounts differ as to what followed. Some close to the board claim that they were informed of how customer payments had been spent.

Customers make staged payments for materials upfront, as with any construction project. Although it’s unclear if any of the money was ringfenced, Harland & Wolff’s current board has concerns that these funds weren’t being used solely to fund specific project expenses. One person who is familiar with the situation said, “It’s like giving my child money to pay for Netflix and he uses it all on Mars Bars.”

Wood’s allies and Raman, the finance chief, deny any allegations of wrongdoing. Wood’s supporters claim that Riverstone orchestrated a “loan to own” plan in which Wood was forced out of Harland & Wolff at the end of July.

The New York hedge funds did not respond to a request for comment. However, sources close to Harland & Wolff’s board stated that the primary lender of Harland & Wolff had supported the business over the past several years. They were also willing to inject new capital when other options failed.

Raman resigned last week after initially being put on absence leave in mid August when PwC, Simmons & Simmons and the law firm began a forensic investigation into “misapplied” customer payments. Raman is weighing up whether to file a lawsuit over his resignation, claiming constructive dismissal and racism. Both he and the company declined comment on the possibility of legal action.

The former finance director said that he was not contacted by anyone to provide evidence for the review. Wood’s supporters, on the other hand, say that the review is an attempt to distract from what they claim is the mismanagement by the turnaround directors of the company.

Downs and Fort will continue to pursue a rescue strategy. Teneo is expected to appoint administrators at Harland & Wolff parent company this week.

This will protect the business from creditors until it can be sold.

Sources in the city said that several parties had registered their interest in the auction which is being monitored by Rothschild investment bankers.

Navantia is thought to be the frontrunner. Harland & Wolff and Navantia had teamed up with each other to deliver FSS to the Royal Navy. Sky News reported on Saturday that Babcock is also interested in buying a piece of the company. Other surprises could still be in store. Wood is reportedly putting together a rival bid in order to regain control. Michael Flacks, an industrial turnaround specialist, is waiting in the wings.

This is a risky move. Placing the plc in administration could invalidate FSS’s contract. Harland & Wolff is currently in talks with the Ministry of Defence, trying to convince officials that it’s better to stick with the business than put the contract out to tender.

The government is also closely monitoring the situation. According to a spokesman, the “market” is in a better position to resolve Harland & Wolff’s financial problems. He stressed, however, that the position of the business department was “at the moment” — hinting at the possibility that things could change in days and weeks.

There is still a chance that a last-minute reprieve will be found. John Wood, former chief executive of Harland & Wolff, said shareholders planned to file an injunction against the board to prevent the company from going into administration.

It is still to be written what will happen to Samson and Goliath in the next chapter.

The end of Samson and Goliath is well known, but Harland & Wolff’s ins and outs could have a way to go. One insider who was expecting to lose his or her job this week said: “One day, the truth will come out. It will be an amazing story.”