Nearly 250 Cosalt workers in Aberdeen face an uncertain future after the engineering firm’s banks issued an ultimatum to withdraw loans at the end of the month.
The company, whose offshore division is based in the Granite City, said yesterday it could go under if its two banks decided to call in their credit.
Cosalt is in discussions with potential buyers of its offshore arm, but said the Royal Bank of Scotland and HSBC feared shareholder approval would be “an expensive and lengthy process”. Cosalt added that both banks questioned whether there would be enough money to continue trading until the deal completed.
The company is also negotiating the sale of its Stockport-based workwear division as it tries to reduce a £17million debt pile.
Cosalt said yesterday its banks wanted other lenders to step in and cover the cost of seeking shareholder approval for the two disposals, or else they would be “enforcing their security” by February 28.
It added: “The company has had and continues to have extensive discussions with existing and potential funders but no alternative source of funding is currently available to the group.”
Cosalt said it could be forced into insolvency proceedings on or before February 28.
Both RBS and HSBC declined to comment.
Michael Reid, an accountant at Aberdeen-based Meston Reid and Co, said the best outcome for the company’s workforce would be a quick sale of its divisions. He added: “That would allow the workers to be transferred across to the buyer under the same conditions and removes the uncertainty.”
Mr Reid said he believed potential buyers of the offshore business may still want to complete a deal quickly, rather than wait to see if Cosalt becomes insolvent, adding: “If you wait until a company goes into administration you may be able to buy assets cheaper but other buyers may come in for them as well.
“There is also the risk of leases being negated and contracts being invalidated following an insolvency.”
Cosalt also revealed that an 80%-owned subsidiary, Grimsby-based Cosalt Wind Energy (CWE), had ceased trading due to falling sales. The group said: “CWE is dependent on the financial support of its shareholders, including Cosalt. As at December 31, 2011, CWE owed £632,882 to Cosalt plc and this has risen to approximately £812,000 at 31 December 2012. The financial position of the Cosalt group, which includes CWE, remains uncertain and as a result the directors of CWE have decided that CWE should cease trading.”