£30m loan to Ferguson Marine Engineering Limited, June 2018

Roedd y cais yn rhannol lwyddiannus.

Dear Scottish Ministers,

Please provide all information held regarding the loan of £30 million made by the Scottish Government in June 2018 to Ferguson Marine Engineering Limited, including but not limited to:

(1) All minutes and notes of meetings held between FME Limited and the Scottish Government.
(2) The loan agreement including interest terms and basis of repayment.
(3) Due diligence carried out by the Scottish Government on FME Limited prior to granting the loan.

Yours faithfully,

Mr Paterson

Dear Scottish Ministers,

Please acknowledge receipt of this Freedom of Information request.

Yours faithfully,

Mr Paterson

Scottish Ministers

FOISA Acknowledgment of request

Thank you for your request dated 30 June 2018 under the Freedom of Information (Scotland) Act 2002 (FOISA) for information held regarding the loan of £30 million made by the Scottish Government in June 2018 to Ferguson Marine Engineering Limited, including but not limited to:

(1) All minutes and notes of meetings held between FME Limited and the Scottish Government.
(2) The loan agreement including interest terms and basis of repayment.
(3) Due diligence carried out by the Scottish Government on FME Limited prior to granting the loan.

We received your request on 30 June 2018 and will respond in accordance with FOISA by 30 July 2018.

If you have any queries, please contact my colleague Katie Phair and myself quoting case number FoI/18/01835.

Kind regards,

Cameron

Cameron Wright | Innovation, Investment and Industries Division | Directorate for Economic Development | Scottish Government | 5 Atlantic Quay | 150 Broomielaw | Glasgow | G2 8LU | Tel: 0300 244 1172 | [mobile number]

dangos adrannau a ddyfynnir

Scottish Ministers

Good morning Mr Paterson

I refer to my colleague's e-mail of July 6th about your request under the Freedom of Information (Scotland) Act 2002 (FOISA) for all information held regarding the loan of £30 million made by the Scottish Government in June 2018 to Ferguson Marine Engineering Limited, including but not limited to:

(1) All minutes and notes of meetings held between FME Limited and the Scottish Government.
(2) The loan agreement including interest terms and basis of repayment.
(3) Due diligence carried out by the Scottish Government on FME Limited prior to granting the loan.

Under section 10(1) of FOISA, our response to your request is due on Monday 30th July 2018. Unfortunately, it is taking longer than expected to deal with your request because there is a large amount of content that we have had to sift through in order to obtain the information you require. I apologise for this delay and hope to be able to send you a response shortly.

Kind regards
Jennifer

Jennifer Moore | Innovation, Investment and Industries Division | Directorate for Economic Development | Scottish Government | Tel: 0131 244 4386 | 07584206983

dangos adrannau a ddyfynnir

Dear Scottish Ministers,

Please respond in full to my FOI request without any further delay.

Yours faithfully,

Mr Paterson

Scottish Ministers

2 Atodiad

Sent on behalf of Jennifer Moore

 

Good Evening Mr Paterson

 

Please find attached a response to your FoI received on July 6^th.

 

Kind Regards

Jennifer Moore

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

dangos adrannau a ddyfynnir

 

References

Visible links
1. mailto:[email address]

Dear Scottish Ministers,

Request for Internal Review

I note your response to my request Foi 18 01835

I request full disclosure of all information held in the public interest and in the interest of transparency.

I highlight the following matters:

1. The £30m loan is of substantial size and it is not in the normal course of business for the Scottish Government to make loans of this nature to private for-profit organisations.
2. There is a close connection between the First Minister of the Scottish Government and the director and ultimate controlling party of FME Limited, Jim McColl *. Jim McColl is a member of the First Minister’s Council of Economic Advisers. It is important that in the public interest robust and impartial procedures were followed prior to granting the loan.
3. FME Limited is significantly overdue in delivering it accounts for the year ended 31 December 2016 to Companies House. The company last reported a financial loss of £2.7 million and was dependent upon the continued financial support of its parent company at that time. A loan of this nature in these circumstances presents a significant financial risk to tax-payers money.
4. The principal customer of FME Limited is Caledonian Maritime Assets Limited – a company wholly owned by Scottish Ministers. FME Limited has reported delays in the completion of a £97m contract for two public-use ferries for Caledonian Maritime Assets Limited. This delay may cause substantial inconvenience to ferry users. Disclosure of full information may provide assurance to ferry users that their ferries are to be delivered.

* The ultimate parent undertaking of FME Limited is Clyde Blowers Capital IM LLP registered number: SO301657. James “Jim” McColl is described as the ultimate controlling party of Clyde Blowers Capital IM LLP.

Please acknowledge receipt of my request.

Yours faithfully,

Mr Paterson

Dear Scottish Ministers,

FoI 18 01835

Please forward my Request for Internal Review to:

Mary McAllan, Director of Economic Development, 3rd Floor, 5 Atlantic Quay, Glasgow, G2 8LU

[email address]

Yours faithfully,

Mr Paterson

Scottish Ministers

2 Atodiad

Dear Mr Paterson

 

I acknowledge receipt of your request for a review of FOI/18/01835. I will
be carrying out this review and will provide a response by 4 September
2018.

 

Regards

 

Susan

 

Susan Tamburrini
Smart Growth Team Leader
Scottish Government
European Structural Funds
3rd Floor
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU

Tel: - 0131 244 6831
BB: - 07867375273

 

Follow us [1]@scotgovESIF    

Read our blog:
[2]https://blogs.gov.scot/european-structur...

 

              

 

dangos adrannau a ddyfynnir

 

References

Visible links
1. https://twitter.com/scotgovESF
2. https://blogs.gov.scot/european-structur...

Dear Scottish Ministers,

Message for Susan Tamburrini

Thank you for acknowledging receipt of my request for an internal review.

Please note that Scottish Ministers have a duty to respond promptly to my request for an internal review. The date of 4 September 2018 is a legal backstop and not a due date.

Yours faithfully,

Mr Paterson

Gadawodd Mr Paterson anodiad ()

The reason for the delay in responding to the original FOI request was given in correspondence dated 27 July 2018 as: “Unfortunately, it is taking longer than expected to deal with your request because there is a large amount of content that we have had to sift through in order to obtain the information you require.”
However, the final information released on 6 August 2018 contained just three e-mails and two internal memorandums (all heavily redacted). This release is not consistent with “large amount of content that we have to sift through to obtain the information you require.”

Gadawodd Mr Paterson anodiad ()

The status of financial Information is available from Companies House using the link below:

https://beta.companieshouse.gov.uk/compa...

Gadawodd Mr Paterson anodiad ()

There is a question whether Scottish Ministers are acting as shadow directors of this business. Correspondence released in this FOI request suggests close involvement in the operations of the business -such as reviewing the 5-year outlook for the business and reviewing cash flow (correspondence dated 30 April 2018).

Gadawodd Mr Paterson anodiad ()

Newspaper articles on the £30m loan:

The Times
https://www.thetimes.co.uk/article/minis...

The Scotsman
https://www.scotsman.com/news/holyrood-h...

Gadawodd Mr Paterson anodiad ()

It is unclear from the FOI release whether the £30m is a loan or loan facility as both terms are used in correspondence. A £30m loan facility suggests an obligation to pay based on a loan agreement. This should require the prior approval of the Finance and Constitution Committee of the Scottish Parliament.

Requirement: "The {Finance and Constitution} Committee agrees to consider each contingent liability in excess of £2.5 million at the earliest opportunity and may take evidence from the appropriate Minister before deciding whether to approve the proposal or to propose an amendment or recommend that the proposal is rejected. If the Scottish Government does not agree with the Committee’s recommendation then the Committee following further information from the Scottish Government may either allow the Scottish Government to proceed or refer the matter to the Parliamentary Bureau for consideration. It will then be for the Parliament to agree whether or not to allow the
Scottish Government to proceed."

Gadawodd Mr Paterson anodiad ()

The release of information under this FOI has been restricted due to Scottish Minsters use of the Public Interest Test.

The Scottish Information Commissioner stated, in the Scottish Government Intervention Report:

"A number of interviewees made reference to the subjective nature of the public interest test as explaining the different views which were taken. I am not comfortable with the view that the public interest test is purely subjective. It is not simply a “finger in the air” exercise. When carrying out the test, an authority must identify and set out the competing arguments as to how the public interest would be served by disclosure of the information and how it would be served by withholding the information. Having identified the public interest arguments on each side, the authority must then carry out a balancing exercise to determine where the public interest lies. Where the balance is even, the information should be disclosed."

Gadawodd Mr Paterson anodiad ()

Extracts from the Scottish Ministerial Code relevant to this FOI request:

Objectivity

Holders of public office must act and take decisions impartially, fairly and on merit, using the best evidence and without discrimination or bias.

Accountability

Holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this.

Openness

Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.

Dear Scottish Ministers,

Message for Susan Tamburrini

Reminder

This is a reminder that a response to my request for an internal review of FOI/18/01835 is due. The legal deadline is Tuesday 4 September 2018. The response must take account of the list of public interest disclosure arguments set out in my message of 7 August 2018.

Should I not receive a response by the legal deadline or receive a response that contains heavily redacted information without substantive reason then I will be referring this request to the Scottish Information Commissioner.

Yours faithfully,

Mr Paterson

Gadawodd Mr Paterson anodiad ()

A link to another FOI request on the same subject:

https://beta.gov.scot/publications/foi-1...

Of particular interest was this:
“The loan facility has not been debated in the Scottish Parliament either in the Debating Chamber or in a Committee session. The Cabinet Secretary for Finance and the Constitution wrote to the Convener of the Finance and Constitution Committee in confidence prior to the public announcement of the loan to inform the Committee.”

The Convenor is SNP MSP Bruce Crawford

Scottish Ministers

4 Atodiad

Dear Mr Paterson

 

Please find attached response to your request for a review of the original
response to FOI/18/01835.

 

Regards

 

Susan

 

 

Susan Tamburrini
Smart Growth Team Leader
Scottish Government
European Structural Funds
3rd Floor
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU

Tel: - 0131 244 6831
BB: - 07867375273

 

Follow us [1]@scotgovESIF    

Read our blog:
[2]https://blogs.gov.scot/european-structur...

 

              

 

dangos adrannau a ddyfynnir

 

References

Visible links
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2. https://blogs.gov.scot/european-structur...

Gadawodd Mr Paterson anodiad ()

Extract of information released in response to request for internal review. Appendix E in information release:

"Transparency
5. Although we do not publish details of individual loans I expect that details of the loan will be made public in due course‎ because it is right that we are transparent and as a consequence of audit scrutiny of either i) a general ferries audit or other associated procurement review; or ii) an audit of Transport Scotland accounts for 2017-18 (although it is of course the SG and not TS making the payment), or; iii) audit of the SG accounts for 2017-18. The audit process for ii and iii would of course not begin until the beginning of 2018-19. The more likely way this would be reported is in [redacted] accounts – they have reported the source of previous loans in the accounts they lodge with Companies House. These are of course available for public consumption, but like the SG this would be for the financial year covering the date of the transaction(s). This would likely not be until much further into 2018."

The blocking of freedom of Information requests is a delaying tactic.

Dear Scottish Ministers,

Message for Susan Tamburrini

Thank you for your response to my request for an internal review. I classify the response as unsatisfactory. I highlight the following points:

1. Comparison of the same document released in the original response to my request and in the internal review shows that redactions were originally made without substantive reasons. Therefore, I can not rule out that other redactions have also been made without substantive reason.

2. In both the responses, redactions have not been cross-referenced to the claimed reason for redaction. This further suggests that redactions are being made without good reason.

3. Information released in Appendix E shows that the blocking of FOI requests on this subject is essentially a stalling tactic and a abuse of good government.

4. I draw your attention to guidance on the Public Interest Test issued by the Scottish Information Commissioner which I believe you have failed to comply with: “I am not comfortable with the view that the public interest test is purely subjective. It is not simply a “finger in the air” exercise. When carrying out the test, an authority must identify and set out the competing arguments as to how the public interest would be served by disclosure of the information and how it would be served by withholding the information. Having identified the public interest arguments on each side, the authority must then carry out a balancing exercise to determine where the public interest lies. Where the balance is even, the information should be disclosed.”

I will now submit my comments to the Scottish Information Commissioner.

Yours faithfully,

Mr Paterson

Gadawodd Mr Paterson anodiad ()

Appeal to Scottish Information Commissioner

The basis of my appeal to the Scottish Information Commissioner is similar to my request to Scottish Ministers for an internal review. However, I have included greater context in my appeal for the benefit of those who may not have the background knowledge of this case. Scottish Ministers have provided limited and heavily redacted information relating to my request. I request full disclosure of all information held in the public interest and in the interest of transparency.
I highlight the following matters:

1. The £30 million loan facility is of substantial size and it is not in the normal course of business for the Scottish Government to make loans of this nature to private for-profit organisations. Scottish Ministers have stated (see correspondence dated 22 June 2018 released as part of the FOI request) that “the purpose of the loan is to improve liquidity of FMEL.” The size of the loan is substantially in excess of that objective.

2. There is a close connection between the First Minister of the Scottish Government and the director and ultimate controlling party of FME Limited, Jim McColl (see note 1). Jim McColl is a member of the First Minister’s Council of Economic Advisers. The stated objective of the Council is “to advise ministers on how to make Scotland's economy more competitive.” As a result, there is a potential for improper influence. It is important in the public interest that robust and impartial procedures were followed prior to granting the loan to an organisation ultimately controlled by a key adviser.

3. FME Limited is significantly overdue (11 months) in delivering it audited accounts for the year ended 31 December 2016 to Companies House (see note 2). The company does not have approval from Companies House for this delay. The company has not filed audited accounts for the year ended 31 December 2017. The company last reported a financial loss of £2.7 million (for the year ended 31 December 2015) and was dependent upon the continued financial support of its parent company at that time. A loan of this nature in these circumstances presents a significant financial risk to tax-payers money.

4. The principal customer of FME Limited is Caledonian Maritime Assets Limited – a company wholly owned by Scottish Ministers. FME Limited has reported delays in the completion of a £97m contract for two public-use ferries for Caledonian Maritime Assets Limited. This delay may cause substantial inconvenience to ferry users. Disclosure of full information may provide assurance to ferry users that their ferries are to be delivered.

5. The information that has been released by Scottish Ministers under this Freedom of Information request indicates that their relationship with FME Limited may not be at arms length. For example, Scottish Ministers are reviewing “the 5-year outlook for the business” and FME Limited “have committed to providing a revised cash flow” (correspondence dated 30 April 2018). It appears that Scottish Ministers are acting (by their communications and by granting the loan) as shadow directors of this private business. That may impair their objectivity as ministers.

6. The information released as part of this FOI request consists of just three e-mails and two internal memorandums (all heavily redacted). For a loan of this size and complexity, it would be reasonable to expect much more internal evaluations and deliberations. My assertion is that the information released under the FOI request is incomplete.

7. Comparison of the same information released in the original response to my FOI request and in the internal review shows that redactions were originally made without substantive reasons. Therefore, I believe that other redactions may have also been made without substantive reason.

8. In both the responses (to the original request and request for internal review), redactions have not been cross-referenced to the claimed reason for redaction. This further suggests that redactions are being made without good reason.

9. Information released as part of the Internal Review (see Appendix E) shows that the blocking of FOI requests on this subject is essentially a stalling tactic and an abuse of good government.

10. I believe that Scottish Ministers have failed to comply with guidance on the Public Interest Test issued by the Scottish Information Commissioner: “I am not comfortable with the view that the public interest test is purely subjective. It is not simply a “finger in the air” exercise. When carrying out the test, an authority must identify and set out the competing arguments as to how the public interest would be served by disclosure of the information and how it would be served by withholding the information. Having identified the public interest arguments on each side, the authority must then carry out a balancing exercise to determine where the public interest lies. Where the balance is even, the information should be disclosed.” Scottish Ministers have not set out the public interest arguments for release of the information.

Note (1): The ultimate parent undertaking of FME Limited is Clyde Blowers Capital IM LLP registered number: SO301657. James “Jim” McColl is described as the ultimate controlling party of Clyde Blowers Capital IM LLP.

Note (2): All FME Limited financial information is sourced from Companies House.

Dear Scottish Ministers,

FOI/18/01835

Please ensure that Scottish Ministers response (including appendix of published information) to my request for Internal Review is published promptly on the Scottish Government's website.

Yours faithfully,

Mr Paterson

Gadawodd Mr Paterson anodiad ()

Notes
Appendix to FOI/18/02172 sets outs “loans advanced” by the Scottish Government between January 2016 and August 2018.
It is probable that loan (34) relates to the first loan to Ferguson Marine:
Loan (34) £15m @ 15% interest. Bullet payment at end of loan
Jim McColl has confirmed to the media that the interest rate is 15% but not the loan period.

It is possible that loan (35) relates to the second loan to Ferguson Marine:
Loan (35) £6m @ 13% interest. Bullet payment at end of loan
Jim McColl has confirmed that the full amount of the second loan (£30m) has not been drawn down.

“Bullet payment at end of loan” indicates that interest on the loans accumulates and is payable only when the loan is finally repaid. The duration of the loans is not given in the FOI and it may be the case that the interest rates refer to rate over the duration of the loan rather than each year.

Gadawodd Mr Paterson anodiad ()

Duration of loans

There is no public information over the duration of the loans. However, from this FOI release (see email dated 30 April 2018) states “officials convened …. a workshop …. to review the 5-year outlook for the business and to explore further the potential basis for new commercial investment to support the medium-term vision”.

Based upon officials reviewing a 5-year outlook it would be reasonable to suggest the loans are for a period of up to 5 years.

Gadawodd Mav anodiad ()

In another FOI reference: FOI/18/02035 Review
Date received: 16 August 2018
Date responded: 12 September 2018

https://beta.gov.scot/binaries/content/d...

https://beta.gov.scot/publications/foi-1...

https://beta.gov.scot/binaries/content/d...

Confirms a "credit facility" and states:

"Final Repayment Date means, subject to the terms of this Agreement, the date occurring 10 years after the first Utilisation Date;"

Also see last page numbered 21 redacted regarding "Maximum Cumulative Drawdown Amount"

Gadawodd Mr Paterson anodiad ()

Further notes for the attention of the Scottish Information Commissioner

Please note, in relation to this topic, the delays between when FOI response dates and when information is published on the SG website and so made available to the general public. Three examples:

FOI/18/01835 Review
Date responded: 06 September
Date published: 21 September

FOI/18/02035 Review
Date responded: 12 September
Date published: 25 September

FOI/18/02174
Date responded: 12 September
Date published: 25 September

In a number of cases, it is requiring external intervention / requesting before information is being published on the website.

Gadawodd Mr Paterson anodiad ()

Notes and observations on FOI release: FOI/18/02174

“Final Repayment Date means, subject to the terms of this Agreement, the date occurring 10 years after the first Utilisation Date;”

“7.1 Subject to the terms of this Agreement the Loans shall be repaid in full on the Final Repayment Date.”

Officials have reviewed the ‘5-year outlook for the business’ (FOI/18/01835) but granted a loan for 10 years (FOI/18/02174).

Conclusion from this and other FOIs:

Loan and associated interest is only repayable on the Final Repayment Date (in 10 years).

Gadawodd Mr Paterson anodiad ()

Further public interest argument for full disclosure: Objectivity in future procurement contracts

The loans granted by Scottish Ministers to Ferguson Marine impact future procurement contracts for a period of ten years (the duration of the loan). Future contracts awarded by Scottish Ministers / CMAL to Ferguson Marine reduce the risk of default on the loans. Conversely, the awarding of future contracts by Scottish Ministers / CMAL to competitor contractors increases the risk of default on the loans. How did Scottish Ministers assess this impact on objectivity?

CMAL is controlled by Scottish Ministers and is not an arm’s length corporation.

Gadawodd Mr Paterson anodiad ()

General public interest argument for full disclosure: Maintaining and increasing public confidence in public institutions - such the government and parliament.

Subjecting public money to scrutiny builds public confidence in public institutions such as governments and parliaments. Scrutiny - by parliament and by the general public - reduces both the possibility and public perception of corruption or other wrong-doing in government decision-making. It encourages both the efficient and effective use of public resources and supports collective learning by experience. It helps protect both public ministers and private contractors through processes which are seen to be above board. Conversely, secrecy with public funds damages and in the long-term undermines public confidence in public institutions.

Gadawodd Mr Paterson anodiad ()

For comparison purposes. Scottish Minister's loan to Prestwick Airport is at 2.2% above the EU base rate for UK state aid, currently 1% (variable). Giving an annual rate of 3.2%. The EU has a requirement that it is a minimum of 1% above the base rate.

Gadawodd Mr Paterson anodiad ()

Further information for the attention of the Scottish Information Commissioner

The following information was published by Audit Scotland on 27 September 2018, i.e. after my FOI appeal submission to the Scottish Information Commissioner on 6 September 2018. This new information is now submitted to the Scottish Information Commissioner as support for the public interest argument for full disclosure set out in my appeal.

http://www.audit-scotland.gov.uk/news/re...
Selected extracts only:
--------------------------------------------------------------------------------------------------------------
Title: Reporting of government accounts should be 'more transparent'
27 September 2018
Audit Scotland

“The Scottish Government needs to be more transparent about the annual reporting of its accounts, including loans to private companies, says the Auditor General.”

“….But she says more improvements are needed to aid transparency.”

“Ms Gardner says the government also needs to develop a framework that clearly outlines its role in intervening financially in private companies.”

“During 2017/18, the Scottish Government provided loan facilities to two private companies - Ferguson Marine Engineering Ltd and Bi-Fab - to support their delivery of current contracts and future business prospects.
But the Auditor General says there is limited public information about the extent of the financial support to the firms.”

"The Scottish Government has taken some important steps to improving its financial reporting, but there are a number of areas it can improve on to help support the Parliament and public in their scrutiny of public finances.

…..it also needs to be more transparent about its overall approach to providing loans to private companies and develop a clear framework to guide its decision-making around how it invests public money."

Gadawodd Mr Paterson anodiad ()

Further public interest argument: Scottish Ministers false use of commercial prejudice

The Scottish Information Commissioner needs to consider if Scottish Ministers are making false use of commercial prejudice as a shield to restrict disclosure and to prevent public and political scrutiny. Rather than prejudice the commercial interests of an entity, it may be commercially beneficial for disclosure for the entity’s existing / prospective customers and suppliers, employees and local communities.

Gadawodd Mr Paterson anodiad ()

2nd Scottish Government loan to BiFab loan as a comparison:

BiFab has obtained a Restructuring Loan Facility of £10 million bearing interest at 18% per annum with no fixed terms of repayment prior to the final repayment date of 2026. As at the date of the Auditor's report, zero has been drawn upon under the Restructuring Loan Facility.

Gadawodd Mr Paterson anodiad ()

Extract from FOI/18/2868:

“From: [Redacted]On Behalf Of Cabinet Secretary for Finance and the Constitution

Sent: 24 April 2018 19:03

To: [Redacted]Cabinet Secretary for Finance and the Constitution; [Redacted] First Minister; Minister
for Transport and the Islands

Cc: First Minister; Deputy First Minister and Cabinet Secretary for Education and Skills; Cabinet
Secretary for Economy, Jobs and Fair Work; Cabinet Secretary for the Rural Economy and
Connectivity; Lord Advocate; Permanent Secretary; {…….further distribution list}

Subject: RE: FMEL - CMAL Expert Review

[Redacted] Richard

Here is a note of the discussion between the Cabinet Secretary (DM) and Jim McColl (JM) this afternoon.

[Redacted]

DM then moved on to the cash flow position of the organisation and that he intended to send a short letter to the Finance Committee that explained, at a high level, the commercial loan that was provided to FMEL by SG. JM was content with the letter being sent as set out. ([Redacted] and Richard to share this with JM once the letter has been sent).”

*****************************************

The letter is to be “short” rather than long and “at a high level” rather than at a detailed level.

Gadawodd Mr Paterson anodiad ()

Letters from Cabinet Secretary to Finance & Constitution Committee:

https://www.whatdotheyknow.com/request/f...

Gadawodd Mr Paterson anodiad ()

More information released on the loans (from another FOI request):

https://www.whatdotheyknow.com/request/5...

Gadawodd Mr Paterson anodiad ()

The Scottish Government has re-published the letters using a clearer method of redaction – and released further information contained within the letter of 24 April 2018. What is particularly striking is, despite quoting “in the interests of transparency and courtesy”, how little information is communicated to the Finance & Constitution Committee. There is no mention of the interest rate or loan term or whether the loans are convertible into equity.

April letter:

https://www.whatdotheyknow.com/request/5...

Scottish Ministers

1 Atodiad

  • Attachment

    FoI 18 01835 UPDATED RESPONSE 7 Dec 2018 Notice of published documents.docx

    131K Download View as HTML

Mr Paterson

 

Please find attached an updated response to your request given a recent
discovery.

 

Kind regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

 

dangos adrannau a ddyfynnir

 

References

Visible links
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Gadawodd Mr Paterson anodiad ()

The £15 million loan of September 2017 is to Ferguson Marine Engineering Limited and is referred to in Companies House documentation as the “FMEL Loan Agreement”. The £30 million loan of June 2018 is to Ferguson Marine Engineering (Holdings) Limited and is referred to as the “Holdings Loan Agreement”. Under the terms of an intragroup loan agreement, FME Holdings is required to transfer the funds into a project account held by FMEL.

Section 2.2 of the Holdings Loan Agreement: “The Borrower shall apply all amounts borrowed by it under the facility to fund FMEL to assist with the long term viability and enhanced capabilities of the business carried on at the property and for other general working capital purposes of FMEL, all as identified in the Business Plan and / or Financial Model.”

Companies House documentation, 2 July 2018, “Alterations to floating charge SC 48 5060 0011”, Intercreditor deed, section 1.3 states: “Holdings [Ferguson Marine Engineering (Holdings) Limited] is expressly permitted by the parties hereto to convert the SG debt constituted in terms of the Holdings Loan Agreement into the capital of Holdings.”

https://beta.companieshouse.gov.uk/compa...

On 2 July 2018, Ferguson Marine Engineering (Holdings) adopted new Articles of Association that allows for the creation of a new class of shares (class B). Class B shares rank equally to existing class A shares except voting rights of class B shares have a maximum of 49% of total voting rights of all shares (i.e. a minority). The amended Articles allow for a listing on a stock exchange and have extensive share exit provisions (section 19 onwards).

=> It appears that the intention from the outset is to convert the second loan (£30m) into a minority shareholding in Ferguson Marine Engineering (Holdings) Limited. This follows the same model as the £35m loan to Burntisland Fabrications Limited (full draw down of loan followed by conversion into class B shares with minority shareholding). Shares may have questionable value.

**************** Key documents *********

Intercreditor deed

https://beta.companieshouse.gov.uk/compa...

Articles of Association

https://beta.companieshouse.gov.uk/compa...

Other notes:
FMEL Loan Agreement Final Repayment Date (£15m loan): not later than 1 June 2021

Gadawodd Mr Paterson anodiad ()

“Ferguson Marine Engineering Limited
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2016

Post Balance Sheet Events (continued)

25 June 2028. The loan accrues interest at a fixed rate of 13% per annum. On the same day, a Warrant Instrument was entered into which provides for Holdings to issue warrants to The Scottish Ministers on a quarterly basis (commencing 30 September 2018) in respect of every £10 of principal amount of loan drawn down in the preceding quarter. Once warrants are issued in respect of any part of the loan, interest ceases to accrue on that part of the loan. Each warrant gives The Scottish Ministers the option to subscribe for one share in Holdings. On the exercise of the warrant the principal amount of loan outstanding will be reduced by an amount equal to the subscriptions price paid by way of set-off against the loan value. At the date of signing of these accounts £ 17 m of the loan has been drawn and £1.7m warrants issued.

On 25 June 2018 a subscription and shareholders’ agreement was entered into by Holdings, The Scottish Ministers and CBC. This agreement requires CBC, under certain conditions, to invest additional monies of up to £8.5m into Holdings. These additional monies are in two tranches with the first being £0.1 for every £1 of loan drawn from the 25 June 2018 loan agreement up to a maximum of £3m and a second tranche of £5.5m to be invested to support the enhancement to the capabilities of the business or support the business development initiatives of the business but by no later than 25 June 2019. To date CBC have not provided additional equity funding under these arrangements.”

Gadawodd Mr Paterson anodiad ()

=> This never was a “commercial loan”. This is a method of transferring large sums of public money into the private sector without scrutiny.

The plan appears to be is to convert the £30 million loan into warrants with a nominal value of £3 million which are in turn converted into class B shares in FMEL (Holdings) Limited giving a minority shareholding with nominal value of £3 million. The actual value of shares, given current conditions, will be £nil.

This is not and never was a commercial transaction.

It is important to distinguish between “commercial loan” and “loan on commercial terms”. At the outset, the loan gave the impression of being a “loan on commercial terms”.

Gadawodd Mr Paterson anodiad ()

Full note 30:

In March 20 17, Clyde Blowers Capital III LP (“CBC”) made additional equity investments into Ferguson Marine Engineering (Holdings) Limited of £1.5m.

On 6 September 2017, Ferguson Marine Engineering Limited entered into a £15m loan agreement with The Scottish Ministers. The loan has a repayment date of the earlier of (i) 1 June 2021 or (ii) the date on which surety bonds associated with the CMAL contracts for Hull 801 and Hull 802 are discharged following the delivery of the second vessel. The loan accrues interest at a fixed rate of 15% per annum. At the date of signing of these accounts, the full loan amount has been drawn.

On 25 June 2018, Ferguson Marine Engineering (Holdings) Limited (“Holdings”) entered into a £30m secured loan agreement with The Scottish Ministers. The loan has a repayment date of 25 June 2028. The loan accrues interest at a fixed rate of 13% per annum. On the same day, a Warrant Instrument was entered into which provides for Holdings to issue warrants to The Scottish Ministers on a quarterly basis (commencing 30 September 2018) in respect of every £10 of principal amount of loan drawn down in the preceding quarter. Once warrants are issued in respect of any part of the loan, interest ceases to accrue on that part of the loan. Each warrant gives The Scottish Ministers the option to subscribe for one share in Holdings. On the exercise of the warrant the principal amount of loan outstanding will be reduced by an amount equal to the subscriptions price paid by way of set-off against the loan value. At the date of signing of these accounts £ 17 m of the loan has been drawn and £I.7m warrants issued.

On 25 June 20 18 a subscription and shareholders’ agreement was entered into by Holdings, The Scottish Ministers and CBC. This agreement requires CBC, under certain conditions, to invest additional monies of up to £8.5m into Holdings. These additional monies are in two tranches with the first being £0.1 for every £ 1 of loan drawn from the 25 June 20 18 loan agreement up to a maximum of £3m and a second tranche of £5.5m to be invested to support the enhancement to the capabilities of the business or support the business development initiatives of the business but by no later than 25 June 2019. To date CBC have not provided additional equity funding under these arrangements.

Scottish Ministers

13 Atodiad

Mr Paterson

 

With reference to your ongoing appeal with the Information Commissioner
for FoI/18/01835, please find attached further information.

 

Green redactions are Section 38(1) – Personal Information

Red redactions are Section 33(1)(b) – Commercial Interests

Blue redactions are Sections 30(b)(i) and 30(b)(ii) – Free and frank
provision of advice and Free and frank exchange of views

 

The final e-mail in the first attachment, refers to 12 documents. We
previously relied on section 25(1) for the documents that are already in
the public domain through previous FoIs or on Companies House, though we
have now provided these and no longer wish to rely on this exemption. The
other 6 documents have been reviewed and are now being part released with
all redactions falling under section 33(1)(b) – Commercial Interests.

 

There are a further 5 PdF documents which were previously withheld. These
are now being part released and all redactions within these documents fall
under Section 33(1)(b) also. Please note this e-mail is too large to send
with all documents included and these further 5 documents will be sent
separately immediately after this e-mail.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

dangos adrannau a ddyfynnir

 

References

Visible links
1. mailto:[email address]

Scottish Ministers

5 Atodiad

Mr Paterson

 

Please find attached the final 5 documents.

 

Kind Regards

Jennifer

 

Jennifer Moore | Innovation, Investment and Industries Division |
Directorate for Economic Development | Scottish Government | Tel: 0131 244
4386

 

From: Moore J (Jennifer)
Sent: 03 April 2019 14:28
To: '[FOI #494945 email]'
<[FOI #494945 email]>
Subject: FoI/18/01835 (Part 1)

 

Mr Paterson

 

With reference to your ongoing appeal with the Information Commissioner
for FoI/18/01835, please find attached further information.

 

Green redactions are Section 38(1) – Personal Information

Red redactions are Section 33(1)(b) – Commercial Interests

Blue redactions are Sections 30(b)(i) and 30(b)(ii) – Free and frank
provision of advice and Free and frank exchange of views

 

The final e-mail in the first attachment, refers to 12 documents. We
previously relied on section 25(1) for the documents that are already in
the public domain through previous FoIs or on Companies House, though we
have now provided these and no longer wish to rely on this exemption. The
other 6 documents have been reviewed and are now being part released with
all redactions falling under section 33(1)(b) – Commercial Interests.

 

There are a further 5 PdF documents which were previously withheld. These
are now being part released and all redactions within these documents fall
under Section 33(1)(b) also. Please note this e-mail is too large to send
with all documents included and these further 5 documents will be sent
separately immediately after this e-mail.

 

Kind Regards

Jennifer

 

Jennifer Moore

Policy Officer, Strategic Industrial Projects

Innovation, Investment and Industries

 

Directorate for Economic Development

Scottish Government, 3^rd Floor, Atlantic Quay, 150 Broomielaw, Glasgow G2
8LU

 

'013124(44386)

'07584206983

y[1][email address]

 

dangos adrannau a ddyfynnir

 

References

Visible links
1. mailto:[email address]

Gadawodd Mr Paterson anodiad ()

‘commercial loan’ versus ‘loan on commercial terms’ – they are not the same!

SG only asked PwC if the loan was on commercial terms. PwC were not engaged to determine whether the loan was a commercial loan (MEIP compliant). PwC also appear to be commenting solely on the commercial terms of the loan but not the subsequent ability to convert the loan to warrants and shares.

*******************************

Document 12: PriceWaterhouseCoopers – 13 June 2018

“In order to provide a loan, SG needs to consider whether such a loan meets with the European Union’s Market Economy Investor Principle (“MEIP”). As part of its MEIP considerations, SG wants to understand key factors to determine whether the loan can be made on commercial terms that would be acceptable to an independent private investor. This should take account of the financial factors that influence SG, but exclude factors such as economic development and employment.

Our comments are presented as a briefing paper to support discussions with Ministers. We understand that a conclusion on providing the loan is a matter for Ministers and that compliance with the MEIP is a broader legal question over and above the commerciality of the terms. We are not engaged to comment on these wider aspects.”

“WE ARE NOT ENGAGED TO COMMENT ON THESE WIDER ASPECTS”

Dear Scottish Ministers,

To FOI Unit

Ref: FOI/18/01835 Appeal

The Scottish Government has a commitment to publish information released under FOI legislation on its website on the same day that it is issued to the FOI respondent. In the above case, information was released on 3 April 2019 and, I believe, has still not been published on the Scottish Government's FOI disclosure website.

Please can you ensure the documents are published. It is public information after all.

Yours faithfully,

Mr Paterson

Gadawodd Mr Paterson anodiad ()

Loan drawdown schedule for £15 million loan:
6 September 2017 - £6m
25 October 2017 - £3.5m
3 November 2017 - £3.5m
20 December 2017- £2m

15% interest is not paid over to the SG but added to the loan value.

Estimated loan interest to be added to loan value (at 13 August 2019) is £4.8 million.

As Ferguson Marine have not provided audited accounts to SG they are in default of the loan agreement and a higher rate on interest can be applied.

The drawdown schedule for the £30m loan is not yet fully in the public domain. However, that loan has been converted in to interest-free share warrants with a face value of £3m. Interest before conversion was 13% pa.

Gadawodd Mr Paterson anodiad ()

Interest on £30million loan

The £30m loan has been converted to share warrants with a face value of £3 million.

Had the initial interest rate of 13% pa continued to apply to the loan, an amount of £4.8 million in interest would be due (up to August 2019). However, as the full draw down schedule for the £30 million loan is not yet in the public domain this is an estimate.

Therefore total unpaid interests on both loans = £4.8m + £4.8m = £9.6m

As the higher default interest rate should be applied, this amount is likely to be an under estimate.

Scottish Ministers

Dear Mr Paterson

 

With reference to your email below, I can confirm that the further
information released on 3 April 2019 has now been published, and is
available at the following link:
[1]https://www.gov.scot/publications/foi-18...

 

Kind regards

Ruth

 

Ruth Ridout | FOI Adviser | Freedom of Information Unit | Scottish
Government | 2W, St Andrew’s House | Regent Road | Edinburgh | EH1 3DG |

 

 

dangos adrannau a ddyfynnir

Gadawodd Mr Paterson anodiad ()

When Mr Mackay says he doesn’t have cost information to hand – that’s not quite true:

The loan Agreement says (note specifically 10.1.2 and 10.1.5):

“10. UNDERTAKINGS BY THE BORROWER
The Borrower undertakes to the Scottish Ministers that throughout the Loan Period it shall:

10.1 deliver to the Scottish Ministers such information as the Scottish Ministers may reasonably require including the following:

……………
10.1.2 monthly financial reports including a profit and loss, balance sheet and actual cashflow against budget (to be submitted within one month of the end of the relevant month and in a format acceptable to the Scottish Ministers), such monthly financial reports to include details of the Permitted Fees and all details in relation thereto;

10.1.3 annual audited accounts to be received no later than nine months after the end of the relevant financial year, other than for the year ended 31 December 2016 which shall be received by 31 March 2018;

10.1.4 within 30 days after the beginning of each financial year an updated Business Plan which includes an updated Financial Model;

10.1.5 as soon as reasonably practicable after the same become available (but in any event within 30 days of the month end to which the management accounts relate) management accounts, such management accounts to be accompanied by commentary in reasonable detail on the financial performance of the Borrower, a build update report on the build out of vessels 801 and 802 plus cost overruns and other issues, details of cost estimations in connection therewith and any such other information as relevant to the delivery of the vessels and to the running of the business.

10.1.6 an annual operating budget consistent with the Financial Model within 30 days after the beginning of each financial year.”

Gadawodd Mr Paterson anodiad ()

Tim Hair, Turnaround Director, at Ferguson Marine, appointed director of the following wholly owned and newly established Scottish Government companies:

Macrocom (1067) Limited
Macrocom (1070) Limited
Macrocom (1068) Limited
Macrocom (1069) Limited

https://beta.companieshouse.gov.uk/offic...

Gadawodd Mr Paterson anodiad ()

Macrocom (1067) Limited >> Ferguson Marine (Port Glasgow) Limited
Macrocom (1070) Limited >> Ferguson Marine (803 - 805) Limited
Macrocom (1068) Limited >> Ferguson Marine (Port Glasgow) Holdings Limited
Macrocom (1069) Limited >> Ferguson Marine (801 - 802) Limited