The eleventh hour rescue bid for Rover proposed by John Towers’s Phoenix consortium is being frustrated by the refusal of any British high street bank to grant a £200m overdraft facility.
With some 24,000 Midlands jobs at risk, the consortium is now understood to have turned to North America in search of financial support, holding emergency talks with US and Canadian banks.
The intransigence of the British banks, including HSBC, Barclays, NatWest and Lloyds, has astonished the Towers camp and sparked a fresh volley of accusations over the conduct of trade secretary Stephen Byers. He has made personal pleas to several potential lenders for support, but has been rebuffed.
While the banks declined to comment yesterday, one Towers aide claimed that Mr Byers’s intervention had actually led to the breakdown of discussions. “Relations just died. It was extraordinary,” he said.
BMW warned last week that unless it could find a buyer for Rover by the end of the month it would close Rover’s Longbridge plant.
All the high street lenders have carried out studies on the impact of Longbridge’s closure on their own banking business in the region, given the inevitable carnage amongst hundreds of small Midlands businesses and the financial damage to many thousands of individual customers.
It has been pointed out that while granting an overdraft facility to Phoenix would be a risky proposition for any lender, the net effect for a big British bank, given the jobs and businesses safeguarded, would be substantially reduced.
Mr Towers, a former chief executive of Rover, met BMW executive director Hagen Lüderitz in London yesterday for talks which were described as “very detailed and positive”. A BMW spokesman said his group agreed with Mr Towers’s summary of the talks and said that a further meeting had been agreed.
Under the advice of accountants Deloitte & Touche , the Phoenix plan is understood to rely on a £400m up-front payment from BMW, together with redundancies being paid for by the German car manufacturer.
Additional working capital would be raised through the sale of existing unsold Rover stock – the value of which is put at “hundreds of millions.”
Though the government is prepared to provide support for the Phoenix bid there is no provision for any government funding or debt guarantees in the business plan, with the Towers camp resigned to the fact that any such help would fall foul of the European authorities.
But on the assumption that Longbridge will remain lossmaking for a further three years, the Phoenix consortium needs an estimated £200m overdraft facility to run the business once the initial cash injection is exhausted.
BMW played down reports that venture capitalists Alchemy Partners had sought to reopen negotiations after the abrupt collapse of its deal to takeover Longbridge late on Thursday.
Having been ground down by the weeks of politicking, Alchemey boss John Moulton’s patience is said to have finally snapped over BMW’s refusal to pick up the pension liability for sacked Rover workers.
Mr Moulton is thought to have received a frosty response from Birmingham city council when seeking indicative planning approval to redevelop land at Longbridge.
Yesterday there were reports that Alchemy had contacted BMW to outline the terms under which it was prepared to resume talks, but BMW said: “We have finished our talks with Alchemy. We don’t see any reason to reopen them.”
BMW also denied there was any pressure on the group’s chairman, Professor Joachim Milberg, to resign. Unions representing workers at the Longbridge plant have been publicly backing the Phoenix plan since it was first launched since it held out the prospect of maintaining volume car production in the Midlands.
But privately union leaders remain dubious about Mr Towers’s chances of success, concerned at the lack of news on funding. “We are still sceptical about the Towers bid. A lot of workers think he is going to rescue them,” one senior of ficer said.
“The fear is they have been led up the garden path and the consortium hasn’t got the money.
“If the backers are in place he should reveal them. Not even Downing Street knows who they are.”
But Sir Ken Jackson, head of the AEEU engineering union, said: “The signs are that BMW are serious about talking with Phoenix. The atmosphere is definitely different to last week. It’s up to Phoenix to demonstrate to BMW that they have the cash.”