Rover to repay BMW’s £500m

MG Rover will have to repay BMW’s £500m ‘dowry’ when it moves into profit, it emerged last week.

BMW has confirmed the deal it signed with Phoenix last May contains a provision entitling BMW to repayment of its £500m working capital injection.

Instalments could begin as soon as 2002, when it is expected that the Longbridge-based car maker will move into the black following its £740m loss in the last financial year.

A BMW UK spokesman said: ‘The £500m is repayable to BMW based on certain conditions being met.

‘The contract states that they would get the money free of interest and, when they return to profitability, they should start to repay it from their dividends.’

MG Rover refused to comment on its financial affairs but denied that investment plans could be set back by a repayment to BMW. Chief executive Kevin Howe said the company is fully funded for its five-year plan, including the introduction of new models.

By the end of 2001 MG Rover plans to undertake building eight models from its three different platforms on the back of a £100m investment.

The company also claims to be substantially ahead of targets set at the time of its purchase — for just £10 — last year.

In December it passed its annual sales target of 200,000 cars, of which 100,000 were sold in the UK. Retail sales through its dealer body increased by 35% in 2000 on 1999 levels.