Harland & Wolff is asking the Labour government to reject a £200mn request for a loan guarantee. This will remove a vital lifeline that was being offered to this troubled shipbuilder in its quest for desperately needed funding.
The company that built the Titanic employs 1,500 people at its four UK-based shipyards. It has been in discussions with Conservative Ministers for over a year to get a loan guarantee, needed to lower its interest payments.
According to sources close to the situation, the new Labour Government has decided to reject the guarantee because it would be an inefficient use of public funds.
People close to the company have insisted that talks are still ongoing. One Whitehall official said that granting the loan guarantee was “deeply irresponsible”.
H&W stated in a press release that it was not informed of any decisions yet, and “we stand ready to meet the new government whenever they choose”.
The decision of the new government could force the company to refinance at its own terms and raise questions about the viability. After failing to submit audited financial statements two weeks ago, the shares were suspended.
The Labour government is also in a difficult position, having just launched a review of the strategic military sector with the aim to revitalize regional economies by using the defence manufacturing industry.
John Healey, the Defence Secretary said that on Monday the sector will form “one cornerstone of a new Industrial Strategy” under the Labour Government. He highlighted its high-wage employment and its ability spread wealth beyond London and South East.
H&W has been awarded a £1.6bn (£1.4bn) contract by Spain’s Navantia for the construction of new ships for The Royal Navy.
The company already has a $115mn loan with New York’s Riverstone Credit Partners, which pays a 14 percent interest rate and matures in December.
H&W hoped to obtain a PS200mn from a group commercial banks with a lower rate of interest, and the government as a guarantor.
The business, which crashed in 2019 and was bought out of administrative by its current management at PS6mn, could theoretically seek new financing from its current lender by increasing or rolling over the current facility.
John Wood, H&W’s chief executive, has previously insisted , that failing to secure the guarantee wouldn’t spell the end of the company, and that there were other options on the table.
H&W announced on Tuesday that the previous Conservative government approved a loan guarantee of 100 percent in principle back in December. The company said it only became aware of the government’s concerns about honouring this 100 percent level in March 2024.
The company responded by offering a revised 80 percent deal, a percentage it claimed was given to “hundreds” of companies.
The company acknowledged its failures to negotiate with the ministers for the first time in a statement on Tuesday.
The government was concerned that the government’s guarantee could be challenged as state aid. They were also worried about how much the Wall Street lender of the company would benefit from the government’s support.
H&W announced on Tuesday that it had shared independent legal opinions explaining the reasons why certain barriers previously identified, such as subsidy controls, should not be used to prevent approval of the guarantee.
Former Tory business and defence secretaries wanted to approve a PS200mn guarantee, but were stopped by Jeremy Hunt.
Privately, the incoming Labour government has accused the previous administration of “negligence”, for having given outline approval to the guarantee loan in December but leaving the company “in limbo”.
One official said, “There’s a lot frustration about the Tory government delaying this decision for so long. It was selfish and irresponsible of them to just ignore the decision and leave it up to the new Labour government.”
A Conservative Party official, however, said that this was a desperate briefing by a Labour Party which doesn’t understand how to run anything. They are just trying to blame the Tories for the next five year.
Riverstone declined comment. Business department declined to comment citing commercial sensitivities.
Union leaders contacted the MoD to seek clarifications urgently. The Northern Ireland government officials had no immediate update and the investment agency of the region declined to comment.
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