UK shipbuilder Harland & Wolff denied stories in the Financial Times and other media outlets that the new UK government is prepared to reject its loan application. The company issued a statement saying it “considers these articles to be speculative and misleading.”
There have been rumors for weeks in the UK that the company’s application for a £200 million (US$260 million) Export Development Guarantee was in trouble as the government was not prepared to guarantee a planned refinancing of the shipyard that also includes investments to expand for an upcoming Royal Navy construction project. The group which was launched after the 2019 collapse of the famed Belfast, Northern Ireland shipbuilder needs to refinance an existing £115 million line of credit from US-based Riverstone Credit Partners (reportedly drawn to £90/$117 million) which comes due in December. Reports are that the company is currently paying a 14 percent interest rate.
The Financial Times in a follow-up report published yesterday contends that the newly elected government believes the loan guarantee would be an “inappropriate use of public funds.” They cite unnamed sources in UK finance that said the proposed loan guarantee would be “deeply irresponsible,” while others in the government highlight that shipbuilding will be a key part of the new government’s industrial strategy.
Responding to the media reports, Harland & Wolff denied suggestions that it had reworked the application or that it ever sought a 100 percent guarantee. They called it a standard application for an 80/20 agreement where the government would guarantee 80 percent of the loan provided by commercial banks. The guarantee would provide access to a lower interest rate and the government would be in line to repay the loan if the company was unable.
The shipbuilder points out that no taxpayer monies would be provided to the company and called this standard product offered to hundreds of other companies in the UK and aboard. They said the company has not been notified that the government withdrew an approval granted in December 2023 or that the government has made a decision.
Harland & Wolff sees it as the next step in the rehabilitation of the group which today consists of the Belfast yard as well as three in Scotland and employs approximately 1,500 people. They noted that all four yards are now fully operational and that investments have already begun for the Royal Navy fleet support ships to be built as part of a consortium with Navantia.
UK union Unite issued a statement in support of the company calling it of “strategic importance” to the UK and its national defense. “The UK clearly needs to have a strong future in shipbuilding,” said Unite general secretary Sharon Graham. The union points out that employment at the Belfast yard has expanded 900 percent in the past five years to more than 645 people plus 45 apprentices.
Since buying the yards the group has reported annual financial losses. Last year it lost £43 million ($56 million) down from £70 million ($91 million) in 2022. The company however has been working with its accountants and had to delay filing its 2023 annual report due to discussions over the process for revenue recognition. Trading the stock was suspended as of the beginning of July due to the filing delay and the company this week said it is “undergoing final audit partner review.”
The new government has declared its commitment to shipbuilding in Northern Ireland with reports that discussions are ongoing with Harland & Wolff. The group said it had already lined up the lender group while awaiting ministerial approval. Alternatively, it could attempt to extend the current credit line or complete new commercial financing but likely at a much higher cost without the government guarantee.
