Strategic commercial interventions: options and case studies

4. Examples of Previous Scottish Government Intervention

Examples of structures which could be considered and have been utilised by SG in previous interventions are set out below, noting that each case will have its own unique set of circumstances and will also need to be Subsidy Control compliant.

Working capital loan

• Example in SG – BiFab (pre loan conversion)
  • Key Considerations – Allowed SG to provide short to medium term funding in order to support through liquidity issues.
  • Can be considered for entities with immediate term cash challenges but strong prospects of recovery in future.

Convertible Loan

• Example in SG – BiFab (conversion of loan debt to equity)
  • Key Considerations – option to convert existing debt to equity at a future date.
  • Can be used instances where a company is unable to repay its borrowings and existing debt is converted to equity. This stops the accrual of interest freeing up working capital to invest in day-today operations of the business.

Term Loan

• Example in SG – Prestwick Airport
  • Key Considerations – allowed SG to provide short to medium term funding to support business growth, potential restructuring and capital expenditure.
  • Suitable where strong future prospects for the business are envisaged.

Financial Guarantee

• Example in SG – Lochaber
  • Key Considerations – provided assurance to a lender from SG that a financial obligation will be honoured, even if the borrower is unable to repay the debt.
  • Can help support delivery of key contracts.
  • Does not require the up-front provision of funds, as these are only required when certain conditions are met, however it does constitute a contingent liability on SG’s annual accounts.

Equity Stake - (Public ownership)

• Example in SG – Ferguson Marine & Glasgow Prestwick Airport
  • Key Considerations – involves SG taking a majority equity stake in a business.
  • Provides SG with an additional level of control over a business to protect its investment and maximising the chance of realising a return.

Back to back transaction

• Example in SG – Liberty Steel Dalzell
  • Key Considerations – not a common transaction structure but consists of two legally separate but economically linked sale and purchase transactions which otherwise share the same trade details.
  • It typically involves three counterparties, of which SG is the buyer in one transaction and the seller in the other, thus acting as an intermediary between the two other parties.
  • Enables SG to facilitate the transfer of a business, its assets and liabilities from the seller to the purchaser by de-risking the transaction for both parties.