Investor in late coal sale pull-out

Apax Partners, the venture capital group, abandoned plans to become a significant shareholder in Mining (Scotland) just hours before the group took over British Coal's Scottish assets, it emerged this weekend.

Apax intended to invest £2.5m in Mining (Scotland), which now runs the Scottish mines previously owned by British Coal. This would have given it a 7 per cent shareholding in the company. Just before the deadline over Christmas, it changed its mind. Its shares were taken up instead by Coal Investments, which increased its stake to 33 per cent, and by Waverley Mining Finance, an Edinburgh investment company that owns around 20 per cent.

Sources close to Apax say it pulled out because it grew increasingly worried about the conditions imposed on Mining (Scotland) by the company's bankers, led by the Royal Bank of Scotland. The banks, which have lent the company around £25m, want the bulk of the funds repaid within 18 months and the rest in about two years.

But Malcolm Edwards, who heads Coal Investments - and who also bid for the English coal mines - said: "The banking covenants are very severe, but I think for Apax there was a general build-up of worry about the business. I think they thought it was a very uncomplicated business, but it isn't."

Mr Edwards said that the banks' conditions were "not nearly as severe" as those imposed on Richard Budge's RJB Mining, which controls most of England's coal fields.

Mining (Scotland)'s principal activities are at Longannet Colliery in Fife; it also operates nine opencast sites and has eight opencast disposal points. The company has 17 further prospective opencast sites. Coal experts say the Scottish operator should be the most commercially secure in the newly privatised industry.