Harland & Wolff: 'the company is insolvent on a balance sheet basis'

Belfast, Northern Ireland-headquartered shipbuilder Harland & Wolff (H&W) has released a business update saying it is insolvent based on its balance sheets and that it is likely to enter administration within a week.

Harland & Wolff Group Holdings updated markets after major moves in August 2024 saw the embattled company announce the immediate departure of its chief executive and board member John Wood, add two new board members, secure US$25M in financing and engage the advisory firm Rothschild & Co to assess strategic options as it looked towards administration.

H&W’s latest statement and update on its business activities said the loss-making company had found itself "in a difficult financial position" with an "absence of an appropriate funding structure following the rejection of the company’s request for a £200M UKEF facility".

The UK Export Finance (UKEF) agency is a government lender that denied an H&W application for funding in July 2024. 

"The newly appointed directors highlighted in late July that there was no evidence of any other potential funding available to support the business at that time. While that remains the case, the company is currently in discussions with several parties to secure interim funding to support the business while the Rothschild & Co process is ongoing," Harland & Wolff said in its latest update.

Among the cuts the business has made to date, it has disposed of its Scilly Ferries operation, a one-ferry business shuttling passengers to the UK’s southernmost archipelago of Scilly on the Isles of Scilly fast ferry. 

"The Isles of Scilly fast ferry has been returned to its leasing counterparty and the subsidiary is expected to enter insolvent liquidation in the coming days," the company said, noting that Zzets had been appointed insolvency practitioners.

H&W said it is looking for an accellerated sale of its marine services business "to protect the 14 employed in this business". 

The company said it will "transition for value" its US operations, that its Australian operations are "dormant" and "certain other developmental activities which are non-revenue generating are also in the process of being wound down and contracts exited". 

Harland & Wolff Group Holdings said its core operations, made up of four shipyards and interests in the Islandmagee Gas Storage project, could see "a further reduction in headcount".

The Group said its continued operational plan relies on naval and commercial shipbuilding contracts including a £1.6Bn contract for a trio of naval fleet solid support (FSS) vessels for Navantia and mid-life extension work on the Sea Rose floating, production, storage and offloading vessel at its Belfast yard and conversion of  Lithuanian naval vessel at its Appledore yard.

Harland & Wolff is building 33 barges for Cory’s operations on the Thames River, with eight already delivered in Belfast and six at Methil, and the first completed at the Arnish site in June 2024. Its Appledore site completed a cable-handling barge in July for KBS Maritime and supporting Royal Navy’s vessels in Portsmouth, UK.

The shipbuilder operates its own fleet of tugboats to support operations at these shipyards and provide services in ports.

According to the company, a review by Rothschilds & Co showed "a number of parties have expressed an interest in acquiring some or all of the group’s subsidiaries and a first-round bid deadline is due shortly. The board is of the view there is a credible pathway to continuing core operations built around a four-yard operation delivering the FSS contract, ongoing projects, and other (as of yet) uncontracted revenue across its sites." 

"With the growth ambition set, there is a material funding need to ensure the Group can overcome its present trading challenges and compete for business with a stable financial covenant provided by a new investor or acquirer of the business. Following initial discussions with its advisers, the board is of the view that interested parties are likely to acquire some or all of the group’s subsidiary companies which hold the shipyard sites."