News: Council endorses Magna finance package
Councillors in Rotherham have endorsed the plan to restructure outstanding Council loans that will enable The Magna Science Adventure Centre to have a more secure future.
Set in the former Templeborough steelworks, Magna is a family attraction with more than 100 hands-on exhibits. Millions of pounds have been invested in conference facilities at the centre which is operated by a charity, the Magna Trust.
In January, Rotherham Council's interim chief executive approved an immediate £100,000 loan after the Magna Trust identified a potential cash shortfall. In February, the Council's cabinet were also asked to approve a new loan facility of up to £250,000 to start on April 1 2015, taking the total available for the year to £350,000.
That decision was deferred with independent consultants, PwC being appointed to undertake a review of Magna's business, to help to strengthen the Magna business plan and to assess the future viability of Magna and to give some assurances moving forward.
The decision was "called in" by opposition members for further scrutiny and was recently brought back to a full council meeting where a full, frank and frictious discussion was held on the options available. Commissioner managing director, Stella Manzie has recently made the minded to decision on the issue but the Council's endorsement was being sought.
The PwC review of Magna was a confidential item on the agenda but the business was described as "fragile." If the Council were to withdraw support it would likely to go into administration or liquidation, placing 80 staff at risk of redundancy and leaving the Council at further risk as they would be placed amongst other potential creditors.
Magna's business plan for the period 2015-2020 includes the strategy to maintain and build on the existing business model, as a visitor attraction and conferencing and events venue. The operators say that they have several projects in the pipeline and have been talking to hotel developers about possible development on the site.
Magna successfully reached completion on the sale of part of the car park for £300,000 in March. Following this, Magna repaid some £160,000 to the Council, with the result that it now has outstanding loans of £440,000. This is made up of a £190,000 long term loan and the £250,000 short term loan.
Options for the Council, who had already made it clear that it didn't want to see Magna close its doors, included calling in the two outstanding loans - a move which would likely plunge Magna into administration, write off the short term loan, restructure the short term loan, or restructure the two loans, totalling £440,000. An option from the opposition group included providing a £2m loan to Magna.
It was agreed that the work would be undertaken to wrap the two Magna loans together as secured loans with a structured repayment plan on the combined loans over a period of ten to 15 years, with flexibility around earlier repayments.
One issue for the Council is the fact that the loans are secured only against the offices fronting Sheffield Road, which are not worth as much as they once were.
The issue of leases and a inter-creditor deed is also complex. The Council is set to work with Magna's legal advisers, DLA Piper, to make changes to the inter-creditor deed to remove all parties, other than the Council. This will enable the Council to secure all its loans against the property.
Officers at the Council will also assist the Trust in identifying and securing commercial and funding opportunities (including the underutilised land and property) to develop the business and strengthen its financial and operating position.
The report added that if there is a significant deterioration in Magna's trading position, the Council could revert to considering calling in the loans or writing off the £250,000 loan in part or full.
Magna website
Images: Magna
Set in the former Templeborough steelworks, Magna is a family attraction with more than 100 hands-on exhibits. Millions of pounds have been invested in conference facilities at the centre which is operated by a charity, the Magna Trust.
In January, Rotherham Council's interim chief executive approved an immediate £100,000 loan after the Magna Trust identified a potential cash shortfall. In February, the Council's cabinet were also asked to approve a new loan facility of up to £250,000 to start on April 1 2015, taking the total available for the year to £350,000.
That decision was deferred with independent consultants, PwC being appointed to undertake a review of Magna's business, to help to strengthen the Magna business plan and to assess the future viability of Magna and to give some assurances moving forward.
The decision was "called in" by opposition members for further scrutiny and was recently brought back to a full council meeting where a full, frank and frictious discussion was held on the options available. Commissioner managing director, Stella Manzie has recently made the minded to decision on the issue but the Council's endorsement was being sought.
The PwC review of Magna was a confidential item on the agenda but the business was described as "fragile." If the Council were to withdraw support it would likely to go into administration or liquidation, placing 80 staff at risk of redundancy and leaving the Council at further risk as they would be placed amongst other potential creditors.
Magna's business plan for the period 2015-2020 includes the strategy to maintain and build on the existing business model, as a visitor attraction and conferencing and events venue. The operators say that they have several projects in the pipeline and have been talking to hotel developers about possible development on the site.
Magna successfully reached completion on the sale of part of the car park for £300,000 in March. Following this, Magna repaid some £160,000 to the Council, with the result that it now has outstanding loans of £440,000. This is made up of a £190,000 long term loan and the £250,000 short term loan.
Options for the Council, who had already made it clear that it didn't want to see Magna close its doors, included calling in the two outstanding loans - a move which would likely plunge Magna into administration, write off the short term loan, restructure the short term loan, or restructure the two loans, totalling £440,000. An option from the opposition group included providing a £2m loan to Magna.
It was agreed that the work would be undertaken to wrap the two Magna loans together as secured loans with a structured repayment plan on the combined loans over a period of ten to 15 years, with flexibility around earlier repayments.
One issue for the Council is the fact that the loans are secured only against the offices fronting Sheffield Road, which are not worth as much as they once were.
The issue of leases and a inter-creditor deed is also complex. The Council is set to work with Magna's legal advisers, DLA Piper, to make changes to the inter-creditor deed to remove all parties, other than the Council. This will enable the Council to secure all its loans against the property.
Officers at the Council will also assist the Trust in identifying and securing commercial and funding opportunities (including the underutilised land and property) to develop the business and strengthen its financial and operating position.
The report added that if there is a significant deterioration in Magna's trading position, the Council could revert to considering calling in the loans or writing off the £250,000 loan in part or full.
Magna website
Images: Magna
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