Mayflower hits the skids

BUS builder Mayflower said talks with its lenders are on the brink of collapse, plunging it further into crisis and forcing the suspension of its shares.

Its pension fund is in dire straits, with a £25.4m deficit, most of it in the UK.

Liberal Democrat pensions spokesman Lord (Matthew) Oakeshott said: 'The worry is that the company is not financially strong enough to make good the deficit.

'When you have a double whammy of a pension fund in deficit and a company in difficulty it shows what the risk could be.'

The company has 4,774 pension scheme members and just over 5,000 staff.

Mayflower's shares were suspended at 6 3/4p, valuing the company at £24m, after it admitted that 'it is likely that the current negotiations with its lenders will prove unsuccessful'. Debt is about £200m.

Its disastrous performance is an embarrassment for former Prime Minister John Major, who was a director until last year.

It is only a day since Mayflower revealed 'financial irregularities' at its TransBus division, the ousting of senior managers including chief executive John Simpson, and the resignation of chairman Rupert Hambro.

The accounting errors prompted discussions with Mayflower's main lenders about fresh financing arrangements. These appear to have reached an impasse.

Mayflower has issued two profit warnings since December. The shares have fallen by more than 70% in three months.

Shareholders have been concerned about worsening trading against a background of rising debt.

Mayflower said it is willing to explore a possible bid from Aim-quoted cash shell Melrose, which is awaiting 'clarification' from Mayflower about its financial position. Mayflower said it is 'reviewing all options'.