The owner of the Harland & Wolff shipyard in Belfast says it has obtained permission from ministers to advance negotiations on a proposed £200 million guaranteed loan facility with the UK Government.
London-listed Harland & Wolf Group Holdings plc commenced talks to secure a larger credit facility earlier this year after disclosing a loss of £70m in the summer.
It is seeking the backing of UK Export Finance (UKEF) under its Export Development Guarantee (EDG) Scheme, which offers lenders a guarantee of up to 80% on the risk of their loan.
In July, the group, which also owns three other shipyards in Devon and Scotland, reported its net debt had increased from £14m in 2021 to £82.5m in 2022.
Harland & Wolff stands to earn hundreds of millions after landing a number of potentially lucrative deals, including a subcontract with Spain’s Navantia to build fleet solid support (FSS) vessels for the UK Ministry of Defence (MoD).
The shipyard owner said it expects to earn around £750m from the FSS contract, but production for the seven-year programme is not due to start until 2025.
The group extended a corporate debt facility with New York-based Riverstone Credit Partners to $100m at the end of 2022.
Harland & Wolff is now pursuing UKEF backing via its EDG Scheme as it seeks a new credit facility from a syndicate of banks.
The UKEF scheme is designed to support businesses in unlocking working capital to invest in exporting.
A trading update on Friday suggests Harland & Wolff could be seeking a full guarantee.
“In order to ensure that the proposed loan facility is compliant with the relevant rules where UKEF was to provide a 100% guarantee to UK commercial lending banks, UKEF will now appoint an independent third party to ascertain an appropriate premium over SONIA [Sterling Overnight Index Average].
“This process will commence in January 2024.”
Harland & Wolff said that following the ministerial approval to progress negotiations, it will now “firm up” the bank syndicate and appoint a lead arranger.
“In parallel, the company will commence necessary documentation in relation to the credit and guarantee agreements as well as the security package that will be offered,” added its trading update.
“It is likely that the security package will entail providing the banks with a first charge on substantially all the assets of the company, similar to what has been provided to Riverstone Credit Partners in March 2022.
“This transaction will be subject to the agreement of ministers, final approval of the financing terms, and investment committee approvals of the banks.”
The directors said they believe the company has sufficient funds to meet its working capital requirements until the new loan facility is completed, citing cash currently held on the balance sheet and expected cash flows in 2024 generated from existing contracts.
