Spotlight on payment to coal bidder

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The Independent Online
RICHARD Budge, the man chosen as the Government's preferred bidder for most of British Coal, has been the subject of a report passed to the Department of Trade and Industry on controversial payments made to him while he was a director of his family's private company.

Mr Budge was a director of AF Budge, a family company that went into administrative receivership in December 1992.

Cork Gully, the receiver, considered that payments were made to him without evidence of proper boardroom authorisation. The Companies Act outlaws unauthorised payments to directors.

Mr Budge agreed to pay the receiver pounds 325,000 without making any admission of liability. The receiver filed a report last year to the DTI under the Insolvent Companies (Reports on the Conducts of Directors) No 2 Rules 1986. The filing of such a report is standard practice in insolvency.

A spokesman for the receiver said this weekend that 'the report is a factual statement of everything we think is of interest to them. Its contents are private and confidential.'

Mr Budge said that he had heard nothing from the DTI and had not been charged with wrongdoing. The receiver had understood the payments to be outstanding loans and asked for them to be repaid, he said. But Mr Budge regarded the payments as bonuses.

'I was very disappointed with my brother and the company secretary, who had not put in the minutes that which had been agreed with them,' he added.

Mr Budge said that when the receiver looked for company assets to reclaim, he was a 'soft target' since at the time he was trying to float his new company, RJB Mining, on to the stock market.

RJB is now in the throes of raising up to pounds 1.1bn to take control of the majority of most of Britain's coal assets.

The DTI said: 'The department and its financial advisers (NM Rothschild) are aware of this matter. We see no reason why it should affect the credibility of the bid.'

BZW, the mining company's main City advisers, said it was confident it could raise the money and that Mr Budge's suitability for taking a leading role in the restructured British coal industry was unquestionable. 'We were satisfied of his suitability to run a public company at the time of its flotation (May 1993). Our confidence has been borne out since that time, as demonstrated by the success of the company.'

But observers in the City and coal industry have begun voicing doubts about whether shareholders will get a satisfactory return. Most have estimated the company's bid at pounds 900m, 50 per cent more than they think the mines are worth.

Gerard McCloskey, editor of International Coal Report, said: 'Either he knows something the rest of the industry doesn't know, or you have to question the advice he's getting.'

Mr Budge was adamant he could repay most of the debt raised to finance the purchase within three years and still pay a good return on the extra equity capital he plans to raise.

'Based on my estimates of sales and margins for the business being acquired, after the contracts I see a very insubstantial return for equity investors,' said John Reynolds, an analyst at James Capel.

(Photograph omitted)