MG Rover's survival may be prolonged by extending a one-week lifeline loan from the British government, administrators of the bankrupt car-maker said yesterday, although hopes for a rescue deal were fading.
MG Rover directors have offered €72 (£49) million in assets, including a castle in central England, to head off the firm's demise, but sources familiar with the situation said such a deal was unlikely to be successful.
The European Commission also raised questions about the British government's loan to cover the car-maker's losses for a week and delay politically embarrassing mass redundancies from the 6,000-strong MG Rover workforce ahead of a May 5th election.
Administrators PwC said the government could extend its €9.5 (£6.5) million loan next week, provided administrators show the business has a future.
"The DTI (Department of Trade and Industry) has to decide whether to review the position on Sunday," a PwC spokeswoman said. "We've got to prove there's a sound business logic for them to extend the loan."
However, the European Commission said it had yet to hear from the British government about the emergency loan, which it plans to study to see whether it breaks EU aid rules.
"It would be helpful for the British authorities to let us have the information we've asked for as quickly as possible, so as to remove any uncertainty as to the compatibility of these aid measures with EU treaty rules," Commission spokesman Jonathan Todd told reporters.
The four directors of MG Rover's holding company, Phoenix Venture Holdings (PVH), said they had offered €72 million in assets to keep the firm alive, although their present value if a quick sale was required would only be between €14 and €44 million.
Sources familiar with the situation poured cold water on the offer, saying it would not be easy to convert the assets into cash and the other companies involved could still file for bankruptcy.
PwC said it had asked PVH to clarify when the offer could be translated into cash and there were "a number of challenges" in turning the assets into a cash injection.
"We've asked them how they will get over those challenges," said a PwC spokeswomen. "I'd have thought it was a matter of days (for PVH to reply). Time is of the essence."
The assets include Studley Castle in Warwickshire, which was built in Victorian times in the style of a medieval castle complete with towers and turrets.
MG Rover, which once made the iconic Mini and Land Rover models, collapsed last week after failing to agree a rescue deal with China's Shanghai Automotive Industry Corp (SAIC).
Sources said it now looks likely administrators will be forced to admit defeat and announce redundancies, although the plant could be mothballed to pay bills while talks continue.
SAIC has said it is unlikely to agree to a MG Rover rescue deal, but a source close to the Chinese car-maker said it could still be interested in MG Rover assets if it went into liquidation.
SAIC owns the blueprints to some Rover cars, called intellectual property rights. This means that it might bid for factory machinery to ship back to China and make cars there.
The Chinese government would not comment in detail on the potential for future deals between SAIC and MG Rover.
"I have noticed reports about this issue," said Chinese foreign ministry spokesman Qin Gang said in Beijing. "The Chinese government is always holding a positive attitude in promoting Sino-UK commercial co-operation."