Harland & Wolff is “insolvent on a balance sheet basis”, with administrations set to be appointed this week, the company has announced.
The process to appoint administrators from Teneo is already underway, plunging the business into administration for the second time in five years.
However, the board of the crisis-hit business has said the process will be restricted to its London-listed entity Harland & Wolff Group Holdings plc, and won’t include the “core operational companies” within the group, which includes its four shipyards and its interest in the Islandmagee gas storage project.
The board said it believes there is a “credible pathway” for the shipyards to continue trading under new ownership, with Rothschilds & Co overseeing the bidding process.
The deadline for the first round of bidding is “due shortly”.
However, shareholders in the AIM-listed entity will lose their investment.
The loss-making company has been plunged into crisis since the UK Government rejected its bid for a £200 million UK Export Finance facility.
Harland & Wolff had been trying to refinance a high interest loan from New York lender Riverstone Credit Partners.
The company had racked up £113m in losses across 2022 and 2023.
With no other avenues left, Harland & Wolff was forced to turn to Riverstone for a $25m emergency loan in July to keep the company going, with changes made to the leadership team.
But in a lengthy trading update on Monday morning, the board of the Belfast shipyard owner said trading has proved challenging given “a significant value of overdue creditors”.
It said the focus was now on preserving core operations, namely its four shipyards in Belfast, Appledore and two Scottish sites in Arnish and Methil.
The core work at Belfast includes a subcontract with Spain’s Navantia to build three fleet solid support (FSS) vessels for the MoD, a deal potentially worth around £750m to Harland & Wolff.
The FSS project suffered significant setbacks over the summer following the overhaul of the company’s board.
On Monday, the company said: “The board is in regular discussion with Navantia and UK MOD on its plans to ensure that key milestones of cutting steel, production readiness and delivery of the vessels remain on track.”
Parts of the business deemed “non-core” such as its marine services and US business, as well as the Scilly Ferries business, are being wound down.
Harland & Wolff confirmed redundancies have commenced with staff in “non-core and certain central support areas”, with staff informed on Monday morning.
But it warned that a further reduction in headcount in its core activities may be necessary, depending on the outcome of Rothschilds & Co process.
Russell Downs, who was appointed chairman over the summer, said: “The group faces a very challenging time given the overhang of significant historic losses and its failure to secure long term financing.
“Good progress has been made to test the market for investor appetite. The board has reluctantly concluded that the company’s own future as an AIM-listed company will likely come to an end in the near future, but that the core operations undertaken by the four yards and Islandmagee will continue to trade as usual.
“It is important to recognise that this is extremely difficult news for the company’s staff directly affected and will impact many others within group.
“We will work to support our staff through this transition. Unfortunately, extremely difficult decisions have had to be taken to preserve the future of our four yards.
“This will clearly be very unwelcome news for shareholders who have shown significant commitment to the business over the last five years.
“The board, the senior management and rest of the team are committed to deliver the best outcome for the four yards and communities they serve to ensure their continued operation into the long term under new ownership.”
