Waterford looks to alternatives in financial crunch

THE MANAGEMENT and board of Waterford Wedgwood are examining alternative means of resolving a looming financial crunch at the company after the Government refused to provide guarantees on up to €39 million in loans for the troubled loss-making business.

Although the company declined yesterday to say what options remain on the table, it is known to have warned Ministers that there would be a serious threat to the employment of more than 500 Waterford Crystal staff if it did not receive support from the State.

Given the low cost of production in eastern Europe and further afield, the medium-term survival of its factory at Kilbarry in Co Waterford is in doubt.

Waterford is restricted from raising further loans from its banks because of the extent of covenants on its existing debt, which exceeds €470 million. While the alternative means of raising money are to sell assets or approach shareholders for more support, scope to pursue either of those options is limited.

Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan said yesterday that the decision not to underwrite loans for Waterford followed a comprehensive examination of the case. "However," she said, "it is important to say the Government does believe there is a future for a restructured Waterford group and, moreover, we will ask management, the unions and people to come together to ensure that restructuring is a success."

Asked if the request was turned down because support for the company might prompt similar requests from other firms, she said the case raised "policy issues" for the Government.

The Minister for Arts, Sports and Tourism, Martin Cullen said the Waterford Crystal review carried over the last four months has created new opportunities to save it. "That due diligence has clearly demonstrated that the possibility exists to preserve the jobs," he said, adding that profits on Waterford-produced crystal "are quite high". The Government is willing to help the company, he said, though its request for a €39m loan underwriting could not be met.

Separately, it is understood that certain Ministers were concerned that State support for the company would expose the Government to further claims for assistance in the future. In light of Waterford's difficult financial position, there was concern that the firm's cashflow might not support a redundancy package for workers at its Kilbarry plant should it decide to close that operation if current plans ran aground.

In such a scenario, it was argued, the Government would be asked to provide funding for redundancies over and above the statutory scheme. Ministers also had concern about the €147.8 million deficit in Waterford's pension fund and the possibility that its liabilities might increase arising from a High Court case being pursued by a former worker.

The group said in April that its chairman, Sir Anthony O'Reilly, and his brother-in-law, Peter John Goulandris, jointly committed to investing a further €33 million before the end of June for cumulative preference shares.

Additional reporting by Elaine Keogh