Ministers preparing Corus rescue
Court backs block on sale of aluminium unit, stepping up pressure for UK plant closures
A rescue package is being prepared by the Government to bail out the stricken steel producer Corus following the collapse yesterday of the sale of its aluminium business.
Ministers are ready to help the Anglo-Dutch group fund the cost of plant closures and redundancies in the UK in an attempt to pull the heavily loss making company back from the brink.
The Government's intervention comes as pressure grows on the embattled Corus chairman, Sir Brian Moffat, to step down in the wake of the group's crisis.
Corus had planned to use the £543m raised from the sale of its Dutch aluminium business to Pechiney of France to finance cutbacks in its UK carbon steels business. But that plan was dashed yesterday after an Amsterdam court ruled that the group's Dutch-dominated supervisory board was within its rights to block the sale. Corus said it would not appeal.
The latest setback sent Corus shares down by a further third to a new low of 4p.
Whitehall sources said the Department of Trade and Industry "stands ready to assist Corus at the appropriate time and in the appropriate manner". Patricia Hewitt, the Secretary of State for Trade and Industry, was said to be in "continual dialogue" with the company and the trade unions with a view to reaching a solution to the problems at Corus.
Under the European Union's strict state-aid rules for the steel industry, the Government could not provide support to maintain uneconomic steel production. But Whitehall officials said it could help to fund a rationalisation programme by paying for redundancy and early retirement costs. Government support for Corus is likely to be co-ordinated through the regional development agencies. Last night Ms Hewitt met MPs representing constituencies in steel-making areas to discuss the latest crisis. Also, the Commons Trade and Industry Select Committee will hold an emergency one-day session.
Some observers believe, however, aid may not be enough to save the company in its present form. Among the options now facing the board are a reversal of the British Steel merger with Hoogovens that created the group in 1999 or a sale to a larger steel company or financial buyer. Another alternative is a debt-for-equity style swap which would place ownership in the hands of its banks.
Corus had net borrowings of £1.2bn at the end of October and committed debt facilities of £2.34bn, against a closing stock market value yesterday of £125m. Today it will report an underlying operating loss for last year of £393m. The UK cuts could see Corus shed up to 3,000 jobs and close one of its three remaining integrated steel plants, with the Teesside works the most vulnerable.
A spokesman for Corus stressed it had not begun negotiations over an aid package with the Government because it had not yet decided on the level of cuts. On Tuesday the group said it would need to make "significant further capacity reductions" and concentrate operations on fewer sites because of continuing UK losses.
The British steel union, the ISTC, said the only future for Corus lay in changes at board level to heal the rift which had developed between its British and Dutch arms. Michael Leahy, the ISTC's general secretary, said: "Sir Brian Moffat has clearly lost the trust of the Dutch management as well as all of the workforce and shareholders. He should realise that it is in the best interests of the company for him to retire immediately."
In Amsterdam the chairman of the Corus supervisory board, Leo Bernsden, one of three Dutch members who blocked the Pechiney deal, backed away from suggestions that the group should be broken up.
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