Saunders will not make Mid Kent killing

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The Independent Online

Robin Saunders, the controversial WestLB financier, will make virtually nothing out of her stake in Mid Kent Water if the business is sold in the near future.

Reports that Ms Saunders, who heads the German bank's principal finance arm, and four of her associates stand to make £20m from an original investment of less than £2,000 are wide of the mark.

In the most recent transaction involving Mid Kent shares, an 8 per cent stake in the company was sold back to WestLB two months ago for a few thousand pounds - the same amount originally paid for it.

The 19.5 per cent shareholding in Mid Kent held by Ms Saunders and her associates is also worth only what they paid for it because the company is still almost entirely debt-financed, making the equity worth a tiny fraction of the £100m figure quoted yesterday.

WestLB bought Mid Kent two years ago for £106m through a newly-created subsidiary called Swan Group, of which Ms Saunders is chairman. The deal was financed by WestLB with £120m of principal debt, a further £23m of high-interest mezzanine debt and the provision of £50m in working capital. At the time WestLB charged about £8m in upfront banking fees. The principal debt has since been refinanced with Royal Bank of Scotland but very little of it has been paid off. Only £7m to £8m of the mezzanine debt is understood to have been repaid. One source said: "Mid Kent was so debt laden, it was barely breaking even."

Ms Saunders had hoped to sell Mid Kent for about £150m - the equivalent of its regulatory asset value - in order to clear the way for the £900m purchase of the much bigger AWG, which owns Anglian Water. Competition law prevents a single company from owning more than one water company above a given size, so WestLB would have to sell Mid Kent before being able to buy Anglian. Ms Saunders had lined up Macquarie Bank as the buyer. But the Australian bank, aware that Ms Saunders was anxious to close the deal, came in with a low price which WestLB had no option but to reject. It is not now clear when WestLB will be able to sell Mid Kent or to whom.

One of Ms Saunders' WestLB associates who also invested in Mid Kent shares is Andrew Gardner, who sits on the board of Swan. Mr Gardner is now on gardening leave at his Surrey home amid conflicting reports that he is suffering from stress and that the German bank was unhappy at not being told Mid Kent would have to be sold before it could buy Anglian.