LONDON - The Phoenix Four directors who bought MG Rover are set to face legal challenges that could force them to pay back large parts of the 40 million ($103 million) they received in the five years they were running the British car company.
Legal experts are advising administrators PricewaterhouseCoopersthat it may have at least two different courses of action to recoup substantial parts of the money.
Meanwhile, the trustees of the MG Rover pension funds will press the four directors to make contributions to help cover a pensions shortfall at the collapsed car maker that could be as high as 400 million.
If they do not pay up, the trustees could force the company they control, Phoenix Venture Holdings, into administration and then press the Pensions Regulator to force the four directors to pay up.
The directors are also facing possible action by the Department of Trade and Industry, which this week receives a report into the collapse of MG Rover prepared by Sir Bryan Nicholson, chairman of the Financial Reporting Council. The DTI is likely to use this report, and information it is expecting to receive from PwC, to launch legal actions to have the four disqualified as directors.
John Towers, Peter Beale, John Edwards and Nick Stephenson jointly bought MG Rover for just 10 in 2000 from BMW, which also lent the group 427 million in an interest-free loan. The four created Phoenix Venture Holdings as the parent company and parked the BMW cash in a subsidiary, with MG Rover's operating companies in other subsidiaries.
Over the five years between the BMW deal and MG Rover going into administration last month, the four directors received around 40 million in salaries, interest payments and contributions to their pension funds. In 2002 and 2003 alone, these totalled 20.87 million, of which 4.79 million went to just one director.
In those two years PVH made a total loss of 139.1 million. At the end of 2003 it had a 224.5 million deficit in its shareholders' funds.
