DIC forced to plough in £53m to prop up Doncasters

Dubai Investment Capital (DIC) has been forced to put £53 million of extra cash into Doncasters, its £700 million engineering business, to prevent a breach of banking covenants.

The Gulf sovereign-wealth fund has come to an agreement with its banks to put the cash into Sheffield-based Doncasters, which employs nearly 5,000, in return for an agreement with lenders to relax its covenants, The Times has learnt.

DIC, which nearly bought Liverpool Football Club, declined to comment but it is understood Doncasters would otherwise have gone into default.

Lenders had asked for up to £200 million to be put into Doncasters, which makes components for Rolls-Royce.

DIC, which is run by Sameer alAnsari, a former finance director to Sheikh Maktoum, Dubai’s ruler, has been hit hard by the credit crunch because it bought at the top of the market.

But unlike its Gulf rival the Qatar Investment Authority (QIA), which walked away from Four Seasons, the nursing home group, DIC has chosen to bolster its over-leveraged investments with more cash.

Of its six portfolio companies, only one, Merlin, the owner of Tussauds and Legoland, has managed without a cash injection this year.

DIC has paid nearly £100 million into Doncasters, Mauser, a German industrial packaging business, and Travelodge, the UK hotels. The cash injections to the three businesses were made in return for lenders agreeing to relax their covenants.

It also stumped up £150 million for Alliance Medical, the pan-European healthcare business.

The cash injection was not part of a restructuring deal.

During the good times private equity investors could have borrowed to fund expansion but DIC was forced to fund the company’s capital expenditure programme itself.

DIC’s biggest problem is Almatis, its German manufacturer of alumina ceramic products, where the company’s main lenders, Goldman Sachs and Oaktree Capital Management, could put it into a Chapter 11 US bankruptcy process as it has a facility in America.

It is believed that this could happen this year, but restructuring talks between DIC and lenders continue.

DIC is one of the few sovereign wealth funds to comply with Sir David Walker’s guidelines on transparency.

In its annual review Mr al-Ansari said: “We became increasingly proactive as the crisis deepened in the second half of 2008, in order to preserve and protect value in our portfolio companies, allocating additional resources wherever necessary.”END