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The sale of storied UK shipbuilder Harland & Wolff to Spanish defence group Navantia will “regrettably” mean losses for creditors and suppliers when the deal is finalised in January, the company’s interim executive chair has said.
But Russell Downs, the bankruptcy and restructuring expert who took the helm in July, told the Financial Times that the deal was the best outcome possible to keep the Titanic maker’s four yards alive and protect 1,000 jobs.
“We tried very hard to get a deal that would work for all creditors,” said Downs in an interview. “We regrettably have to recognise we were not able to get all stakeholders to a position where they would get their own best outcome.”
Hobbled by losses and high interest payments on its debt, H&W’s parent company collapsed into administration in September.
The 163-year-old shipbuilder had been struggling to stay afloat since the UK’s new Labour government in July refused a request for a £200mn emergency loan guarantee as an inappropriate use of public funds.
H&W’s Wall Street lender, Riverstone Credit Partners, extended a $25mn emergency loan in July, on top of a previous $115mn facility. Suppliers to the company are believed to be owed tens of millions of pounds.
Thursday’s announcement of a deal for Navantia to buy the yards in Northern Ireland, England and Scotland included no financial details, including no mention of the price of the assets. H&W more than tripled its revenues in 2023 and halved operating losses to £24.7mn.
The central element of the deal was a UK government agreement to increase a £1.6bn contract to build three Royal Navy support vessels that Navantia secured in 2022 along with H&W — an uplift the Spanish group had been pushing for in talks.
Downs declined to comment on the price for the yards or say by how much the UK government had agreed to increase the Royal Navy contract.
Jonathan Reynolds, business secretary, told MPs on Thursday that the UK had agreed “some changes on commercial terms to the overall value of that Fleet Solid Support contract” but said they were “relatively minor”. The UK’s Ministry of Defence declined to disclose the details “for reasons of commercial sensitivity”. Navantia also declined to comment.
Downs said his “delight” for the workers and yards at the outcome of months of “intense” negotiations was “of course contrasted by my disappointment for the uncertainty and losses this will create for creditors, especially suppliers who will be unsecured creditors”.
Riverstone declined to comment.
H&W’s collapse in September was its second in five years. Advisory firm Teneo was appointed administrator to wind up the “insolvent” company while Rothschild & Co assessed strategic options.
Some staff, including Allan Smith, H&W’s director of shipbuilding, have since resigned or left. Smith did not respond to a request for comment. The current workforce numbers about 1,000, meaning no job losses are expected in the sale.
Downs said there had never been any question of Navantia not buying all four yards.
“We worked diligently through an M&A process with Rothschild & Co prioritising seeking a new investor, then a sale of the legal entities and only very recently concluding the best outcome would be secured through an asset-based sale of the yards and workforce,” he said.
That meant a “pre-packed” sale by the administrators next month, Downs said, adding that the companies that run the yards would “ultimately cease to exist” and that a notice for each to enter administration had been filed.
While some approvals still needed to be finalised “I don’t see any real risk [to the sale going through],” he said.
Downs, who described his work as “almost done” and said he would be moving on once the sale went through, insisted it was the best deal available.
“I came into the business in July after the newly voted-in government made clear it would not risk taxpayers’ money in the group,” he said. “As such, we had to find a markets-based solution, and that’s where we have got to.”
