DTI offer fails to salvage liner work

The partners in a struggling £344m Merseyside cruise liner project have said a revised offer of government aid does not go far enough.

Shipbuilder Cammell Laird has written to the DTI asking it to improve for a third time its proposal to underwirte the building of two liners, which would guarantee hundreds of jobs.

The latest Government offer relied on the start-up cruise line operator Luxus UK providing a performance bond of £103m, to be paid if the project fails.

Jim Davis, chairman of Luxus UK, said it would be impossible for his company to accept the Government’s offer, which was received at the start of this week. ‘Our bankers could not come up with £103m for the performance bond,’ he told The Engineer.

However, Davis did not accept that this amounted to a rejection of Government help. Les Royle, chief executive of Luxus UK, added that the company was still in discussions with the DTI.

Luxus announced last year that it planned to raise finance to operate two new cruise liners, to be built by Cammell Laird.

The Government’s financial support initially included an offer to underwrite £275m of the project’s cost, as long as Luxus repaid £172m should the whole deal fall through.

This proposal, made to Luxus before Christmas, was turned down and the DTI was asked to reconsider the level of the performance bond. Under the revised Government offer, the required bond was cut by £68m.

Luxus has not said how much it could pay back, but there was frustration at Cammell Laird, where the latest Government offer was not seen as a significant move forward.As The Engineer went to press, there also appeared to be confusion between Luxus and Cammell Laird on the future of the project. Luxus’ immediate response was to say the deal was off, before confirming that talks would continue with the DTI.

The DTI refused to comment on the letter from Cammell Laird, other than to say it was being considered and a reply could be expected in a few days.

The £344m contract to build the cruise ships includes the Government’s mortgage guarantee of £275m and an intervention fund of £30m. This form of state aid is now illegal under EU law, but stands in this case because the deal was signed before intervention funding was banned.

That leaves Luxus to come up with the remaining £39m and the £103m performance bond.

If the contract goes through Cammell Laird would build the liners at its Merseyside, Tyneside and Teesside yards. Extra fitting out work would be done at the Gosport yard acquired by Cammell Laird last year.

The shipbuilder has also secured a 20-year lease on yards in Marseilles, and was reported to have approached the French government for backing in return for building the ships there instead. But Luxus rejected consideration of this option as premature.

Without the deal Cammell Laird would have to make large job cuts, but a spokesman refused to say how many jobs would go. The shipbuilder made 440 people redundant before Christmas when a deal to extend an Italian cruise ship fell through.

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