Mayflower in emergency talks with banks

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The Independent Online

Mayflower, THE heavily indebted bus manufacturer, is back in emergency talks with its bankers less than two months after tying up a £160m overdraft facility, after its auditors discovered new losses at two of the core businesses.

The company's shares fell by a fifth after it said full-year results would be postponed until it has squared a new agreement with its lenders. David Donnelly, the finance director, said: "Back in December the banks were presented with a plan and results for 2003, but the results they have got now are different. We have to explain to them why, and we are having those discussions now."

Mayflower said an administrative review revealed it was underprovisioning against the possible costs of carrying out repairs under warranties on some of its buses. There will also be additional asset write-downs as a result of bringing three bus divisions under one unit. New management at the combined TransBus operation had found "a bugger's muddle", Mr Donnelly said.

The profits warning was compounded by news that trading at its car chassis business in Germany has deteriorated in recent weeks, although Mr Donnelly revealed that the company has received offers for the business. "We are looking at the options for the German business, which include selling it, giving it away or closing it down," he said.

Mayflower, which counted the former prime minister John Major among its non-executives until last April, has hired an insolvency expert as "restructuring officer" to advise on ways to raise cash to meet the first tranche of loan repayments, £70m due next January. Net debt at 31 December was £176m, compared to the company's market capitalisation last night of £71m.