Harland & Wolff Denies Reports Government Will Reject Financial Rescue Loan
Harland & Wolff Group, the continuation of the storied 160-plus-year-old Northern Ireland shipbuilder, is adamantly denying reports in the British media that the government is poised to reject loan guarantees critical to the future of the operations. The company called the reports which first appeared today in The Times (London) and spread like wildfire to outlets including The Financial Times, “misleading and inaccurate,” while it sought to reassure shareholders and the financial markets.
Last December, the company reported that it had sought and obtained permission to proceed with negotiations for a proposed £200 million guaranteed loan facility through UK Export Finance. Under the scheme, the government would provide a 100 percent guarantee to UK commercial lending banks, in effect a bailout to provide the working capital necessary for the business to continue.
The company said through a combination of cash on the balance sheet and expected cash flows in 2024 it had sufficient funds to meet its working capital requirements until the new loan facility was completed. However, it requires a third-party review and government approval. Its auditors warned the business faced “material uncertainty” requiring new sources of financing and additional work.
The Times report which is now being echoed by the BBC and The Financial Times suggested that Jeremy Hunt, Chancellor of the Exchequer (the government's chief financial minister) has decided to reject the application. Media reports however said that the Defence Minister, Grant Shapps, the Trade and Business Ministry, and the Northern Ireland Office, are all in favor of providing the loan guarantee. Yesterday, Shapps heralded a new “gold age” of shipbuilding in the UK as part of the efforts to enhance the Royal Navy and a broader government policy to revitalize UK shipbuilding.
BBC is suggesting that the news is a demonstration of a deep divide in the government over the shipbuilding strategy. They reported the treasury is against the policy.
The famed shipbuilding which traces its roots back to 1861 has been working to rebuild its business after falling into administration (UK form of bankruptcy) in 2019. The current owners acquired the assets in Northern Ireland in 2019 and later other facilities to its current form of four shipyards and fabrication facilities. The shipyard delivered its first newbuild in 20 years in 2023, garbage barges for the Thames.
The hallmark of the efforts is the participation in the £1.6 billion contract from the UK government for support ships to a group consisting of Harland & Wolff and Spain’s Navantia. The Times asserted in its report that H&W would collapse without the loan guarantee and the Royal Navy ships would be built in Cadiz at the Navantia yard. Harland & Wolff has been winning other contracts including the recent refurbishment of the new Margaritaville at Sea cruise ship and the conversion of another cruise ship for a three-year live-aboard world cruise. They also won the mid-life extension contract for the SeaRose FPSO and are the preferred bidder in the Falkland Islands Port Replacement Project. They also recently announced an agreement to work with Austal.
"We were disappointed to read this article (Times) and the reaction it has caused, given that we have grown the business to become a major player in the UK shipbuilding sector, whilst spreading our risk over multiple markets,” responded John Wood, Group Chief Executive Officer, Harland & Wolff in a statement filed with the stock exchange. “Our EDG application has not been rejected and continues to be work in progress. I expect to be providing a fuller update on our refinancing plans in the next few weeks."
Despite the company’s assurances that it “remains comfortable with the progress of this application,” the stock price plunged 30 percent after The Times article appeared. The share price recovered later in the day but was down nearly 15 percent versus the prior closing price.
Harland & Wolff states that it working through a five-year plan while forecasting revenues of £200 million by the close of FY 2024. They said 90 percent of the revenue is already contracted for this year. They said the company is working to build 2025 revenues with a goal of EBITDA break-even in FY24.
Other sources are also expressing confidence in the company and the loan guaranty. An MP for Northern Ireland told the BBC the reports were “wide of the mark,” saying they were confident in broad support for Harland & Wolff.