'Tiny' payout for MG Rover creditors

THE MG Rover car company has debts of around £1.8bn and assets of just a fraction of this, a report sent to creditors by administrator PricewaterhouseCoopers has revealed.

The disparity between its estimated £85m of assets and the huge debts means that creditors, who have filed claims for more than £1.37bn in unpaid bills, could get as little as 5p in the pound. The administrator's report says that the company has pension liabilities of some £325m and was losing about £25m a month before it went out of business in April.

The size of the financial hole at MG Rover will massively reinforce demands for an independent inquiry into what happened at the car company.

News of a huge pension fund black hole means many Rover workers may face a dire retirement. The Pension Protection Fund says it will not step in to help, while the future of claims against MG Rover by Phoenix Venture Holdings are uncertain.

Phoenix has a claim, believed to be legally enforecable, of £469m on MG Rover. Some 5,000 jobs were lost when the company ran out of money just before the General Election. When former owners BMW disposed of Rover, it was left with a huge cash pile and resources to run the business ? where that money has gone will be a central question for any inquiry.

Opposition MPs yesterday renewed their demands for an inquiry, calling on Trade and Industry Secretary Alan Johnson to appoint an investigation into the company's collapse as well as the circumstances of the company's takeover by the so-called Phoenix Four directors led by John Towers.

Earlier this week, the Financial Reporting Council, which investigates accountancy and auditing issues, said its own inquiry into Rover's accounts had raised 'a number of questions' but precisely what these questions are and whether it will get any answers to them remains unclear.

In a statement, the Financial Reporting Council said the report raised questions which 'may be relevant' for the Department of Trade and Industry to consider. The Financial Reporting Council's chief executive Paul Boyle said on Monday that he believed the report may have unearthed irregularities. And observers believe the FRC's comments make a full inquiry much more likely.

There was no immediate word from the DTI, however. A spokeswoman for the department said the FRC's report had been received and would be studied carefully. She added: 'The Secretary of State Alan Johnson has received a copy of the report and will respond shortly, after considering its contents.'

Besides the pension liabilities identified at MG Rover, the administrators will themselves submitting a hefty bill for their work on the business since it ran into difficulties last month.