Cammell Laird, the Liverpool-based shipbuilder, has called in the receivers following the suspension of its shares this week.
It is thought the company requested that the stock exchange suspend dealing on Wednesday because the company was unable to meet a £4.6m bond repayment scheduled for 15 April. The bond of £77m was taken out last autumn to finance a planned expansion.
Cammell Laird’s shares had fallen 90% from last year’s high of 141p to less than 6p this week.
On Wednesday evening company bosses were locked in a crisis board meeting prior to making an announcement to the 700 workforce.
If the company is liquidated it could be broken up and sold off. It had asked its financial adviser Close Brothers and the adviser’s US partner Houlihan Lokey to consider how the company could be restructured. The recommendation was expected to be for the company to be carved up into six different yards.
The trouble began last year when Cammell Laird lost out on a £1bn contact to build a roll-on-roll-off ferry for the MoD.
This year did not start well when the chief executive of five years John Stafford resigned. Stafford had taken the company through an ambitious expansion plan with the purchase of the Gibraltar Shipyard in 1997, the Wear Dockyard and Tyne Dock Engineering and a 49% stake in Oregon-based Cascade General of Portland.
Cammell Laird built a mid section for the Italian cruise liner Costa Classica, but the ship’s owner pulled out of the deal before it was fitted. The yard has since filed for dissolution of that contract. Without any income the firm is set to default on a £50m loan taken out to finance the deal.
Since last year Cammell Laird had been hoping that it would be saved by a major luxury cruise liner deal. The cruise liner start-up company Luxus had been negotiating an aid and loan-guarantee package with the UK government. Cammell Laird would be the sole contractor to build the two 28,000-tonne ships.
The DTI said in February it would share an extra £70m of risk with Cammell Laird to underwrite the possibility of the Luxus contract falling through. The DTI had already offered £210m in loan guarantees to cover the contract. But Luxus and Cammell Laird said it was not enough.
The shipbuilder does have work at its various yards around the world, but not enough to keep it afloat. Last month it won a £5m contract from the Royal Navy to repair a ship in Tyneside, which would have saved 150 jobs for a couple of months.
Union leaders said they were shocked by the shares announcement. John Edmonds, general secretary of the GMB union, said: ‘Obviously the workforce will be very concerned. But we are confident that shipbuilding at Cammell Laird remains viable.’An AEEU shop steward told The Engineer: ‘The prospect of liquidation had come as a bolt out of the blue for the workforce.’