Possible US investor for Waterford

A US private equity fund is understood to be in talks to take a controlling stake in Waterford Wedgwood for €600 million.

Under the terms of the deal, the US investor group would assume about €400m in debt — split almost equally between bonds and bank loans — and provide the struggling crystal and ceramics manufacturer with €200m in new capital, according to sources.

The deal is desperately needed to save Waterford Wedgwood because it has been unable to raise operating capital in recent months and has posted nearly six years of consecutive losses.

Without a cash injection, it could soon be declared bankrupt.

The company has until January 2 — the third postponement from creditors — to make mounting loan payments or face the possible forced liquidation of assets.

The US investors have not been named but are understood to have commenced due diligence. It is understood that two other potential backers have also held talks with management.

Bank of America, one of Waterford’s lenders, acts as an agent for a group of the company’s lenders and investors.

Bank of America spokeswoman Julie Westermann declined to comment on the ramifications of a possible Waterford deal or the amount of debt Waterford holds.

She said doing so would break confidentiality agreements.

Waterford Wedgwood has been shifting production overseas in recent times to cut costs.

The Wedgwood ceramics division has moved most of its production from central England to Indonesia, while crystal production has been largely moved from Ireland to eastern Europe.

Those shifts have sharply reduced overhead costs, but a combination of the falling dollar, slowing sales of key products and the global credit crunch have put its financial future at risk.

For the six months ending October 4, the company said its losses rose to €75.8m, while first-half sales fell by 15.4% to €207.6m.

The company’s majority shareholders — the O’Reilly family and deputy chairman Peter Goulandris — own a joint 51% stake and have poured about €400m into the company to keep it afloat in recent years.

The O’Reilly family would be “pragmatic” in considering the offer that will strip it of its controlling stake, one source said.

Waterford Wedgwood shares have been virtually worthless for months. They have fallen on the Irish Stock Exchange at one-tenth of a euro cent.

This reflects the fact that the company’s assets are worth a fraction of its debts, which grew 7% over the past year to €448.9m.