Shareholders to be wiped out as Titanic shipbuilder sinks into administration

Harland & Wolff investors say restructuring experts moved toward administration too quickly

Harland & Wolff has confirmed that shareholders in the troubled Titanic shipbuilder will be wiped out after bosses formally appointed administrators.
The London-listed company, which suspended trading of its shares at the start of July, said on Friday that investors should not expect “any returns” at the end of a review of the business.
It came as Gavin Park and Matt Cowlishaw, of Teneo, officially took over as joint administrators of the group, Harland & Wolff Plc. 
The company had announced last week that it was expecting to appoint them imminently. At that point shareholders had also been warned that there was “no return likely” based on a review of the business by advisers at Rothschild. 
Subsidiaries for each of Harland’s four yards – in Belfast; Appledore, Devon; Methil, Fife; and Arnish on the Isle of Lewis – have not been placed into administration and continue to trade.
When shares in the holding company were suspended in July, they were worth 8.4p each valuing the business at £14.5m. That compares to a share price of around 50p five years earlier. 
The shareholder wipe-out has triggered anger, with investors last week questioning whether the move to call in administrators was premature.
In a question and answer session with Russell Downs, a restructuring expert who was parachuted in following the departure of chief executive John Wood in July, one shareholder asked: “As directors, you have a fiduciary duty to act in the best interests of the company. 
“Bearing this in mind, why did you not wait for Rothschild to complete their strategic review before moving towards administration?”
Mr Downs replied: “We thought long and hard about the decision we had to take and, ultimately, it became the inevitable conclusion that, given the company’s insolvency on both a balance sheet and a cash flow basis, it was the right thing to do.
“Whilst that brings about the end, in all likelihood, of the company’s trading shares, it does not preclude the fact that shareholders still own the company and the administrator, in due course, will provide a full account of the value realised and how that is ultimately attributed.
“For my part, we tried. We kept the business going as long as we can [sic].”
Later when asked if investors may benefit from the potential sale of the company’s yards in future, he said: “As and when the underlying businesses are sold, then value will flow through the group in accordance with its relevant priorities – dealing with the secured creditor, dealing with any other creditors, and ultimately, potentially arriving up at the Plc entity. 
“We will have to wait and see. It will fall to the administrators to give you an answer to that question in due course.”
He added that he continued to believe “that holding the group together is the way to drive the best value for all stakeholders”, rather than selling off individual yards. 
Last week the company also confirmed it had begun an investigation into alleged misuse of customer payments worth more than £25m under former boss Mr Wood.
The former chief executive has dismissed the allegations as “ridiculous”.
Mr Downs told shareholders he could not comment on the investigation, which is expected to be continued by administrators. 
Harland’s most valuable remaining asset is arguably its share of a £1.6bn contract to build three support ships for the Royal Navy.
Large chunks of the ships were due to be fabricated at Appledore, with the rest of the work done by fellow contractor Navantia, the Spanish state-owned shipbuilder, in Cadiz. 
The vessels would have then been assembled at Harland’s historic shipyard in Belfast. 
However, the company’s financial troubles have plunged the project into crisis. 
In recent weeks, bosses at Harland – assisted by Rothschild – have initiated talks with potential buyers who could take the business on, with Navantia emerging as the frontrunner.