Harland & Wolff boss resigns as company seeks emergency funding

The government has confirmed that it will not provide a £200m loan guarantee to Harland & Wolff, the owner of the stricken Belfast shipyard that built the Titanic, sparking intensified rescue talks between the company and its Wall Street lender.

The shipbuilder had hoped to secure a guarantee of up to 80% to help it avoid collapsing into administration for the second time in five years.

However, it said on Friday that the Department for Business and Trade had confirmed it would not provide an export development guarantee, triggering “expedited” discussions with US-based creditor Riverstone Credit Management.

Rothschild & Co has been engaged to explore “strategic options” for the company, which one source said could also involve it being broken up and sold.

In the meantime, H&W hopes to secure short-term funding from Riverstone, believed to be worth around £20m, in the next few days. The talks will no longer be led by John Wood, its chief executive, who will take a “leave of absence” with immediate effect, five years after leading the previous £6m rescue of the shipbuilder.

Wood announced his sudden departure, understood to be a condition imposed by lenders, in a text message to directors overnight on Thursday, according to an earlier report in the Financial Times. Veteran accountant Russell Downs, who worked on the administration of Wall Street bank Lehman Brothers, will join as interim chief executive while talks continue.

“The great weight of responsibility for all stakeholders involved in the business to secure a long-term future is crystal clear to me and I am enormously honoured to be given the responsibility to find a solution,” said Downs.

“I will be working tirelessly in consultation with employees, management, customers, suppliers, unions, government agencies and other stakeholder groups in the coming weeks.”

The shipbuilder was forced to suspend its London-listed shares a fortnight ago, raising concerns about its future. It has missed two deadlines to file audited accounts, raising questions over its finances and its ability to fulfil a £1.6bn contract to build the three “fleet solid support” ships that will carry supplies such as ammunition and food to the navy’s aircraft carriers.

Related: Struggles at Belfast’s Titanic shipyard reflect UK’s faded naval power

The crisis is viewed as the first significant test of industrial policy for the new Labour government in London.

The previous government had provisionally approved a partial bailout, under which the state would underwrite 100% of a £200m loan to the company by a consortium of lenders. But the DBT decided not to approve the plan, despite H&W reducing its requested loan guarantee to 80%.

The company’s remaining directors will now continue talks with Riverstone Credit Management, with which it already has a $115m credit facility, charging an interest rate of more than 14%.

The UK government, a major customer via Royal Navy contracts, will also be party to the talks, H&W said.

The departing CEO, Wood, led the rescue deal in 2019 when the shipyard was bought out of administration by Infrastrata, an energy company listed on London’s Alternative Investment Market.

Infrastrata rebranded under the Harland & Wolff name, and turned its focus to rebuilding the shipyard. It also bought the Appledore shipyard in Devon, and the Methil and Arnish yards in Scotland.

However, the company has struggled financially with the investments needed to make the yard ready for a big contract. It was in talks with the UK government over a £200m loan guarantee. The guarantee would have allowed the company to refinance its £190m in debt and other liabilities.