Ministers poised for fresh Rover bail-out as Phoenix cash delayed

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The Independent Online

The prospect of the Government providing a further bail-out of MG Rover increased yesterday after it became clear that the offer of £49m in assets from the directors of its parent company, Phoenix Venture Holdings, could not be delivered in time to save the stricken car maker.

The prospect of the Government providing a further bail-out of MG Rover increased yesterday after it became clear that the offer of £49m in assets from the directors of its parent company, Phoenix Venture Holdings, could not be delivered in time to save the stricken car maker.

John Towers, the PVH chairman, also conceded that the true value of the assets might be only half the figure initially estimated when the offer was made to MG Rover's administrators PricewaterhouseCoopers, on Monday.

The admission came as another MG Rover company, MG Sport and Racing, filed for bankruptcy last night. PwC said it was looking to sell the sports car maker separately as a stand-alone business.

The uncertainty over the value of the PVH assets and the difficult and time-consuming process of turning them into ready cash means that the administrators are more likely to turn to the Government for a further cash injection to pay the wages of MG Rover's 6,000 workers.

The Trade and Industry Secretary, Patricia Hewitt, authorised a £6.5m loan to the administrators on Monday to avert thousands of job losses at Longbridge just as the election campaign was getting into full swing. The money runs out at the end of the week and the Government must then decide whether to provide a further cash injection.

PwC said that would partly depend on whether it could present a business case for keeping MG Rover afloat while efforts continued to save the company. The main focus of the administrators is to try to restart talks with China's Shanghai Automotive Industry Corporation (SAIC), which pulled out of joint-venture talks with MG Rover last week, precipitating its collapse.

But the administrators will not be in a position to present a proposal to SAIC until next week at the earliest and have not yet had any direct talks with the Chinese company. They have, however, made contact with SAIC's investment banking advisers, Rothschilds.

Mr Towers and his fellow PVH directors have been heavily criticised for taking £40m in pay, pensions and perks while MG Rover headed towards crisis. On Monday, they announced they would give the administrators £49m worth of assets in other PVH companies not in administration to help keep Longbridge alive.

The assets included cash, equity stakes in Rover dealerships and the company's training and conference centre, Studley Castle in Warwickshire. Failing this, they offered to put their 40 per cent shareholding in PVH into a trust set up to benefit Longbridge workers and their dependents.

Commenting on the offer, one of the joint administrators Tony Lomas said yesterday: "There are a number of challenges in getting to a position where the directors can turn that into a cash injection. We do not underestimate the potential complexity of analysing whether or not funds can be released by the respective PVH companies."

Mr Towers said that a "reasonable estimate" of the value of the directors' 40 per cent stake in PVH was between £10m and £30m. That would value PVH as a whole at £25m to £75m. However, he added: "It is important to note this value is subject to attack by third parties associated with the administration of other parts of the PVH Group."

The two trustees of the new Phoenix Trust will be Carl Chinn and Nigel Petrie, who will act on a voluntary and independent basis. The voting rights attached to the 40 per cent stake would be passed to the trust "in due course".

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