Cable clarifies reasons for axing Forgemasters loan
Business secretary Vince Cable was today forced to clarify reasons given by David Cameron and Nick Clegg for axing an £80 million loan to Sheffield Forgemasters.
The funding had been agreed by Labour to help the firm expand its business in the nuclear industry, but soon after taking office, the coalition Government cancelled the loan on the grounds of affordability.
The Prime Minister and his deputy came under fire from MPs for accusing the company's directors of being unwilling to dilute their shares.
Mr Cameron told MPs to look at Forgemasters' shareholder structure and "see who was really going to benefit from that not very thought-through piece of financial engineering".
And Mr Clegg said the firm only sought public funding because "they did not want to dilute their own shareholdings in the company".
In a written ministerial statement, Liberal Democrat Mr Cable said: "Although the question of equity dilution had no bearing on the decision not to proceed with the loan to Forgemasters, comments made by the Prime Minister and the Deputy Prime Minister have been queried and I therefore wish to explain the position."
Mr Cable pointed to comments made by Forgemasters chief executive Graham Honeyman in an interview with the Yorkshire Post in June.
Mr Honeyman told the newspaper he wanted support from the Government because "private equity would take the whole of the shareholding away from Forgemasters and put it in the hands of somebody else".
He added: "That's not just my shares (49%) or the other directors - 65% of the shop floor own the shares in the company."
Mr Cable told MPs: "It is this dilution that the Prime Minister and the Deputy Prime Minister were referring to when they spoke to the House.
"The chief executive of Sheffield Forgemasters has confirmed that he is prepared to dilute his shareholding in the company in order to facilitate the project.
"However it has also been clear that the shareholders would seek a fair price for any equity sale, and at this time their view is that their returns from growing the business organically are likely to exceed those from undertaking the 15,000-tonne press project if the purchase of the press was financed by substantial equity dilution."
Mr Cameron and Mr Clegg were accused by Labour MPs of misleading Parliament after they cited the unwillingness of the company's owners to dilute equity as one reason the loan was scrapped.
It was reported that Mr Clegg later wrote to Mr Honeyman saying: "[You] made clear to me your own willingness to dilute your equity share."
The Government has also been forced to deny that the decision to cancel the loan was influenced by a request from a Conservative Party donor.