THERE was grave concern in Waterford and the entire south east region last night at the prospect of a final collapse of the Bell Lines rescue effort and a consequent steep slump in freight traffic through the port.

A liquidation situation will have major consequences for the 1OO local staff, local and national hauliers and the port operators, Waterford Harbour Commissioners.

WHC has been dependent on Bell, the major port user, for more than two- thirds of its income - the bulk of which has gone to meet repayments on up to Pounds 12 million of European Bank loans, which are under-written by the Government.

The port authority has a 15-year agreement with Bell, dating from September 1993, and involving a schedule of substantial rental payments. Liquidation of Bell, along with the inevitable collapse in confidence among customers, will result in a drastic shortfall in port income until the traffic can be replaced.

WHC will now depend on its business interruption insurance to sustain its loan repayments, but these policies expire at the end of the year and the port authority itself will then be dangerously exposed.

The capacity of the port to continue trading will depend on the liquidator's ability to manage the multiple consequences of the new situation, including probable action by creditors in numerous countries seeking to protect their interests.

The only bright side is the nature and location of the port itself, which is the country's closest deepwater multi-purpose port to mainland Europe. The highly profitable routes out of Waterford, particularly to Rotterdam and France, will be attractive to a number of international shipping lines, but the time taken to sign up new carriers will be crucial.

The most serious consequences of liquidation could be a slowdown in the State's external trade, 8 per cent of which moves through Waterford and could have problems finding capacity on other routes to take up the slack.

The port authority has already said Waterford would continue to trade in a liquidation situation, but than it would have to mount a major drive to find alternative carriers as soon as possible.

While the port's modern container-handling facilities have been largely restored to full operational capacity following storm damage last year, the prolonged crisis at Bell Lines has hit confidence and trade has fallen back rapidly in recent months.

As part of the latest rescue package which the Bell examiner was seeking to assemble, WHC had drafted a revised schedule of payments which they were willing to accept, but it is believed that the prospective investors were unwilling in the last analysis to accept the risk involved.

In the liquidation process, the purchase of viable parts of the company without such encumbrances will be much more attractive to potential investors. The fate of the company's employees and creditors, however, will be thrown into the melting pot.