Banks face £199m shipyard claim

CRISIS-hit Harland & Wolff has launched a £199m claim against two of Britain's biggest banks to recoup huge losses on a drilling rig deal that went disastrously wrong.

The legal action against subsidiaries of Barclays and Lloyds TSB is seen as the final throw of the dice in the Belfast shipyard's long struggle for survival.

'Our future is now in the hands of Barclays and Lloyds,' an executive told Financial Mail. 'We hope they will accept their responsibilities as the owners of these rigs.'

Barclays and Lloyds TSB financed the purchase of the two offshore drilling ships by American company Global Marine, now part of the GlobalSantaFe company. It operates the vessels under 20-year leases, but the banks own them.

The H&W claim stems from a dispute between it and Global Marine. The Belfast shipbuilder says the cost of building the drilling ships soared far beyond original estimates because Global demanded expensive changes. 'It was as though they had ordered a Mini but refused to leave without a BMW,' said the H&W executive.

Barclays and Lloyds TSB claim they are third parties in the affair. So far, neither has agreed to negotiate with the yard. But they will almost certainly have to pay up if H&W succeeds, then try to recover the cash from GlobalSantaFe.

The claim is nearly £70m more than H&W initially estimated it was out of pocket. The yard's problem is that arbitration on the claim could take more than 18 months, but it will have to lay off workers from June unless it wins new orders.

'We would prefer a meaningful discussion instead of going through a lengthy and costly arbitration-process,' said a spokesman for H&W, in which Norwegian maritime group Fred Olsen is a majority shareholder.

'We are ready to go to arbitration - but by then we could be looking at the closure of the company.' H&W has been paid £65m by GlobalSantaFe and this will be deducted from any settlement from the two banks if it wins its claim. If it loses, it will have to repay the £65m and would certainly go bankrupt.

It has a core staff of 500 - down from 35,000 in its heyday - and will have no work after it finishes two roll-on roll-off ferries for the Ministry of Defence. With its financial future in doubt, firms are unlikely to place orders that might take two to three years to complete.

Barclays said: 'We are sensitive to the issues but our hands are tied. We may have legal title to the vessels, but really we are passive partners.'