Thread: MG Rover may be unable to take new UK loan

MG Rover may be unable to take new UK loan, report says



Reuters / April 14, 2005



LONDON -- Administrators of bankrupt British carmaker MG Rover may not be able to accept an extension to a UK government loan this weekend, assuming the UK offers such a extension, a source familiar with the situation said.

The carmaker filed for bankruptcy on Friday and the government subsequently lent it 6.5 million pounds ($12.3 million) to cover its operating losses for a week while the company tried to resurrect rescue talks with Chinese investors.

Extending the loan for another week would delay politically embarrassing layoffs affecting MG Rover's 6,000-strong workforce just three weeks before a general election.

However, under English law, administrators have a duty to creditors of a bankrupt company and must determine the company has a future before they can accept new debt.

"The company has to have some sort of prospect ... At this point it's difficult to see how that can be the case," the source said. "Administrators can't take gift aid."

The government has set aside 25 million pounds in addition to the initial 6.5 million pound loan, the Times newspaper reported on Thursday.

But if the company has no immediate prospects administrators could not accept the extension which would deplete the company's assets and harm existing creditors, the source said. "There's no point just spending money -- the company doesn't have a lot of assets."

MG Rover creditors include suppliers, a pension fund and Germany's BMW.

A UK Department of Trade and Industry spokeswoman declined to comment on whether PricewaterhouseCoopers could accept a loan extension and said the newspaper report was just speculation.

"It is speculation only. No decisions have been made on further funding," the spokeswoman said. PricewaterhouseCoopers was not immediately available for comment.

The European Union may also jeopardize extensions of the government loan. The EU, which places restrictions on state aid for troubled companies, was still undecided whether the loan was legal, a European Commission spokesman said on Wednesday.

MG Rover's talks with investor Shanghai Automotive Industry Corp. collapsed last week, precipitating MG Rover's bankruptcy, and Shanghai Automotive has since said it was unlikely to agree to a rescue of the company.

BMW said on Thursday it would be open to talks over granting the future use of the Rover brand to other rivals if MG Rover became insolvent.

"We don't want to be a bad sport. If an interested party came to us, then we'd have to talk about it, but at the moment this not even an issue nor are there any discussions being held," a company spokesman said.

MG Rover acquired a licence to use the Rover brand name indefinitely from BMW, which sold the company in 2000, but the licence would expire if the company became insolvent. MG brand rights were sold directly to MG Rover.

Originally posted by Captain_Rightfoot
Does Rover still make the Engine for the Defender ? IF so, where does this leave us??

land Rover make all there enignes plus the Rover K seris engine (1.8 petrol) at Solihull
So no problems there
A mate of mine went to a rover dealership yesterday and walked away with a brand new MG F for £10,000 half the price they were. So bit of a steal