The UK Department of Trade and Industry (DTI) made no change to its aid offer to British shipbuilder
and repairer Cammell Laird, stoking concerns the firm could lose a $500 million contract. Bonds issued by the troubled company have halved in price over the past week as fears grow that the company will not make its first interest rate payment, due on April 15, bankers said. The debt is now worth just 10 cents to the euro.
The company said in February it would lose the make-or-break contract with U.S. cruise ship firm Luxus unless the government improved an aid and loan guarantee package to secure the deal by the beginning of March.
But the DTI told Reuters on Monday it had written to Cammell Laird last Monday restating the same position and that it is now awaiting the company’s response. Cammell Laird declined to comment on Monday. Concerns the company won’t meet its obligations on the coupon payment have depressed the price of the 125 million euro bond due October 2010 to 10 percent of face value on Monday, dealers said, from around 20 a week ago.
The company’s bond price has tumbled since being issued last October. Cancellation of a contract with Italian customer Costa Crociere
in January was followed in February by fears the Luxus contract would fall through with the loss of 1,500 jobs.
Dealers also said the bond was now being sold on a “flat” rather than “accrued” basis.
Bonds traded flat are sold without any of the interest accrued on the bond through to the trade date, which implies anticipation of default. The buyer does not expect the coupon to be paid, so will not pay the seller this additional sum.
Bankers said they were concerned Cammell Laird’s banks would not allow it to make the first coupon payment on its bond, preferring to preserve funds to service senior loan facilities, rather than decreasing the pool of capital available in the event the firm goes bankrupt. — (Reuters)