Ministers have lost more than £ 60million in public money trying to save the shipyard company at the center of Scotland’s ferry building fiasco, the Herald can reveal on Sunday.
New financial documents have revealed that £ 36.1million of the £ 50.1million in public funds the Scottish government attempted to recover after Ferguson Marine Engineering Ltd (FMEL) was put under administration in August 2019 will not be recovered.
The money owed was the result of public funds pumped into ailing shipyard company Inverclyde in the form of loans before it went insolvent and owed nearly £ 80million.
New financial documents have revealed ministers were only given £ 6.5million in exchange for their debt. An additional £ 7.5million debt was used to buy the business and take it under state control.
It comes after ministers turned their backs on a £ 25million insurance bond provided by a US insurance company HCCI which allegedly secured ferry construction at the center of the Scottish shipbuilding fiasco, with the aim of allowing a controversial nationalization.
READ MORE: Former Ferguson Marine chief says ‘rescue’ from nationalization of ferry fiasco business is nothing of the sort
The move meant that HCCI, whose £ 25million debt meant they legally owned the assets of FMEL’s shipyard, would not be able to take control – paving the way for a takeover by the State.
The bond has been put in place to ensure that if FMEL goes into administration and is unable to deliver the ferries, CMAL will receive £ 25million to help enable their completion.
But that meant HCCI was the highest ranked of FMEL’s secured creditors – and ahead of the Scottish government – meaning they were on the front line before ministers getting their debt paid.
The deal between ministers and HCCI meant the insurance company received every penny of its claim on FMEL – money that would normally have been spent on building the two long-awaited island ferries whose non-delivery by the yard naval costs resulted in more than doubling of an initial £ 97million contract.
The FMEL run by magnate Jim McColl collapsed following a dispute with Caledonian Maritime Assets Ltd (CMAL), the taxpayer-funded company that owns and buys ferries, over shipbuilding. The owner blamed the repeated design changes for vessel construction issues for operator CalMac, which is also publicly owned.
Mr McColl said responsibility for the costs to the taxpayer of his business collapse lay with the Scottish government and CMAL, the taxpayer-funded company that owns and purchases ferries.
Mr McColl’s Clyde Blowers Capital engineering group, which saved the Port Glasgow shipyard in 2014, also lost £ 3million to the collapse.
The revelations of spending for the taxpayer came after it emerged that the Scottish Government-owned shipyard recovery director was paid more than £ 1.5million for 454 days of work between August 2019 and July 2021.
Tim Hair, a Gloucestershire-based businessman and former head of engineering firm Chamberlain, was given the deal by former finance secretary Derek Mackay two years ago.
Ministers believed they were acting in the public interest by taking control of Ferguson Marine, as he said he saved the shipyard from closure, saved more than 300 jobs and ensured that the two ships under construction would be completed.
The Herald on Sunday previously revealed ministers made sure there was a ‘right to buy’ before granting FMEL a £ 30million loan in June 2018, knowing this paved the way owned by the state. While then finance secretary Derek Mackay told the public the loan was “to further diversify their business,” internal documents show the real reason was that FMEL was in financial difficulty and was in danger of falling under administration. .
READ MORE: Ministers’ Ferguson Marine ferry fiasco repairer paid £ 1.3million over almost two years
Memos reveal that the £ 30million to be repaid in ten years came with a ‘right to buy’ if the company went bankrupt.
A right to buy clause has also been put in place if Mr McColl, who sits on the Prime Minister’s council of economic advisers, has not invested £ 8.5million within two years.
A secret deal was reached between HCCI and the Scottish Government as FMEL executives filed complaints just before the company’s bankruptcy, saying ministers were not serious about keeping it afloat and held them away from vital discussions.
Documents show that even two weeks before FMEL entered administration, executives believed ministers were still trying to pursue what they called “the solvent solution” of keeping it as a private company – while that behind the scenes, ministers had paved the way for nationalization.
After coming under administration, former FMEL executives later accused the Scottish government of having no serious intention of letting it be privately owned while being warned that the nationalization would be subject to EU land laws. state aid.
They accused ministers of forcing him into insolvency by rejecting a plan that would bypass any requests for state aid and prevent construction costs for two essential ferries.
“They told us that loans were the only way to get around state aid, but don’t worry because it’s short term, there will be mediation or a settlement with CMAL, and we could pay it back. money, ”McColl said. who said the business didn’t need to be saved.
“The government is hiding the real mess here and it needs to be properly investigated. ”
READ MORE: Revealed: Ministers’ secret path to controversial state takeover of Ferguson Marine
He says the company was forced into receivership by CMAL’s refusal to discuss the significant cost overruns resulting from the variations in the ships’ contract demanded by them and the Scottish Government’s refusal to allow a determination process. ‘independent experts to resolve the dispute.
“This is all due to CMAL and the government and no one is taking it head on. ”
Joe Reade, chairman of the Mull & Iona Ferry Committee, which has fought for better service, said there were questions about the configuration of ferries in Scotland, all aspects of supply, operations and property being controlled by the Scottish government. .
“The mechanism, the structure is absolutely not commercial and does not encourage good behavior,” he said.
“If no one has a motive for profit, then you get bad decisions.”
Transport Scotland video exposed early hopes for disastrous ferry project
The Competition and Markets Authority has previously expressed concern about the “potential risks” of state control over the way ferries are operated, managed and paid for.
Dr Alf Baird, expert transport adviser to the Scottish government, also warned against the ‘cocooning’ of the three-tiered ferry service from the bureaucracy controlled by the Scottish government – Transport Scotland as donors, operators CalMac and CMAL ferry company It was further revealed that Teneo, who acted as directors of FMEL, have dropped a £ 48.3million claim first filed by the former shipyard owners against CMAL regarding the contractual dispute regarding the increase in costs.
This would have meant more money to pay the amounts owed following FMEL’s financial collapse, which includes the £ 5.95million owed to 168 unsecured creditors.
It is understood that the ministers took an unpublished “independent legal perspective” on the claim and concluded that it could not intervene in the trade dispute.
READ MORE: Sturgeon should be held responsible for ferry fiasco, say former Ferguson Marine executives
Teneo said he obtained an “independent legal opinion” on the claim “confirming that there was no realistic possibility of pursuing the claim for the benefit of the creditors.”
Mr McColl filed a complaint about the decision, saying a professional claims consultant had looked at the claim line by line and decided it was valid.
“Everything is well recorded but the government refused,” he said. “This is a very detailed complaint and in normal practice you appoint an independent complaints consultant to review it.
“It was a serious claim that was well developed and in my opinion was the company’s greatest asset.
“Because it was money owed by CMAL and indeed by the government, if it had been properly pursued. But he was buried.
“This is a mess the government has tried to bury and hide and I take exception to blame the previous management because they were top people in the industry and very competent. To flout them is shameless.
A Scottish Government spokesperson said: ‘The Scottish Government remains firm on its commitment to the ships, the workforce and the yard. Ship delivery is essential to support the vital ferry network by adding two new vital ships to the CalMac fleet. ”