LDV buyout looks shaky

LDV, the British white van maker, has been knocked back by the UK government for a £30m bridging loan that could stop a management buyout in its tracks and see the company shut its doors.

Its fate now rests with a £26m loan from the European Investment Bank (although the UK government is not guaranteeing the loan), in addition to possible private equity participation.

Jon Moulton’s Alchemy Partners, which tried to buy Rover a few years ago, has ruled itself out for the time being.

Moulton told IFR Buyouts Europe: “Nobody’s asked us from the company or EIB. So, at the moment, it would be fair to say we’re not showing any interest in chasing such a proposal.”

As the latest casualty of the downturn in the UK’s automotive industry, LDV has not made a van since December and has not made a profit for four years. Some 850 jobs at its Birmingham plant are now at risk, as too are the positions of 1,200 dealerships and 4,000 suppliers.

Erik Eberhardson, chairman of LDV’s Russian parent company GAZ, had sought the bridging loan to help him lead a management buyout and push ahead with LDV’s green or electric van plan.

“LDV has a good plan to transform itself into a green van manufacturer, which I strongly believe in,” he told the BBC’s Today Programme earlier in the week.

“So I agreed to lead the management buyout; and we have an application with the European Investment Bank that has been positively received.”

But, LDV has not paid back the £24m that the government lent to it in 2004 – admittedly two years before GAZ, Russia’s second largest automobile maker, bought the van maker.

“We have written to LDV and reiterated our view that the primary responsibility for supporting LDV and the management buyout rests with GAZ,” according to Lord Mandelson’s Department for Business Enterprise and Regulatory Reform.

Mandelson controversially stayed (albeit briefly) last summer on the luxury yacht belonging to GAZ’s controlling shareholder, Russian oligarch and aluminium baron Oleg Deripaska.

“But in the absence of such support from GAZ, we cannot see a case for further assistance from the Government,” Mandelson’s department added.

No longer Russia’s richest man, Deripaska is under pressure financially as his business empire suffers in the global recession.

GAZ recently confirmed that it was looking to restructure part of a Rbs5bn (US$140m) bond issue.

Aluminium giant UC Rusal – in which Deripaska is the controlling shareholder – has already had to refinance a US$4.5bn loan with Russian state development bank VEB, which is chaired by Prime Minister Vladimir Putin.

Deripaska also sold off his 9.99% stake in German construction company Hochtief, last October.

Around the same time, he was forced to sell his 20% stake in Canadian auto parts maker Magna after creditors that helped him fund the US$1.4bn deal made margin calls.