MINISTERS agreed to wipe out bond that ensured £25m in default payments over the collapse of the shipbuilders at the centre of Scotland's ferry building fiasco - paving the way for its controversial nationalisation, it has been revealed.

The secretly negotiated deal which formed the pathway to a state takeover involved waiving performance bonds that acted as an 'insurance' against the company going under and not being able to complete two lifeline ferries.

It came as it emerged former executives of Ferguson Marine Engineering Ltd (FMEL) lodged complaints just before the firm went under, saying ministers were not serious about keeping it afloat and were keeping them out of vital discussions.

Documents show that even two weeks before FMEL went into administration, directors thought ministers were still trying to pursue what they called 'the solvent solution' involving keeping it entact as a private business - while behind the scenes ministers had created a pathway to nationalisation.

According to the latest financial statements over the administration, the Scottish Government is still owed over £40m from the collapse of FMEL having using £7.5m of what they were owed to buy the business. They would only expect to get a tiny fraction of that debt back.

Last week islands minister Paul Wheelhouse told a parliamentary inquiry that the government would have far rather have seen it as a private business and that the state takeover was in the public interest.

Revealed: Ministers' secret path to the controversial state takeover of Ferguson Marine

Details of the deal which wiped out 'default' payments caused by the FMEL financial collapse emerged as it was confirmed that the delivery of two lifeline island ferries MV Glen Sannox and Hull 902 have been delayed by a further six months as a result of the coronavirus pandemic.

The further delays means that the delivery of both ferries, which were due online in the first half of 2018, will be between four and five years late.

Jim McColl-led FMEL went into administration in August, last year following a dispute with Caledonian Maritime Assets Ltd - the taxpayer-funded company which buys and leases publicly owned CalMac's ships on behalf of the Scottish government - over the construction of two ferries under a £97m fixed price contract.

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The Scottish Government then got approval to take full control of the last civilian shipyard on the Clyde as it went under with blame attached to soaring costs of the ferry contract - which have now more than doubled.

The Herald on Sunday revealed last week that ministers had ensured there was a "right to buy" a year earlier when giving FMEL a £30m loan, knowing it was creating a path to state ownership.

Documents revealed ministers were making financial arrangements should the shipbuilder fall into administration two years before its financial collapse in August, last year - offering a £15m loan a month later.

While finance secretary Derek Mackay was telling the public a further £30m loan a year later was “to further diversify their business", internal documents state the real reason was that Ferguson was in financial trouble and at risk of falling into administration.

Further papers relating to the process to the state takeover reveal that it was highlighted to ministers as early as August, 2017, that Texas-based insurance firm Tokio Marine HCC which provided a "surety bond" to ensure the delivery of the ferries had a hold over the assets of Ferguson, including the shipyard and equipment.

In June, 2018, after ministers had provided a £30m loan, it was noted the company's security ranked ahead of ministers as creditors if the FMEL fell into administration.

Some experts say that HCCI's position would cause issues for any state takeover.

Official documents confirm that the bond from Tokio Marine HCC subsidiary HCCI ensured that should FMEL enter into administration, meaning it was unable to deliver the two ferries, government-owned CMAL would receive £24.5m to enable completion of the vessels.

Surety bonds are common business pledges to pay a sum if one party fails to meet certain obligations to another, such as failing to fulfil the terms of a contract and usually provides payment protection to subcontractors and suppliers.

READ MORE: Shipyard bosses accused of 'designing as they went along'

A PwC report to ministers in considering options for Ferguson Marine's financial position three years ago highlighted that any agreement to amend the surety bond was "significantly unlikely to happen" and that "there are very few commercial reasons that would motivate them to make any amendments to this arrangement".

But in a new analysis of the Scottish Government's position, it has confirmed that talks took place between ministers and HCCI before FMEL fell into insolvency to "understand its intentions and consider what implications this would have for us, both in our role as second ranking creditor, and for our wider interests".

Footage of Glen Sannox being launched on 21 November 2017 by the First Minister Nicola Sturgeon. It is still awaiting completion.

An agreement was reached that involved foregoing the bond worth £24.5m and in its place HCCI handed over an undisclosed sum.

A statement signed off by ministers went on: "An agreement was reached between HCCI and CMAL that would see HCCI pay a negotiated amount, release its securities and CMAL agree not to call the bonds. This allowed for the option of Scottish ministers’ control of the business in the administration period.

"The administrators of the business, Deloitte, commercially marketed the business and sought and received bids from prospective purchasers.

"At the conclusion of this process, the Scottish ministers’ bid was identified as representing the best return for creditors, and thereby the successful bidder. Had an amicable commercial solution not been available this could potentially have seen a significant period of disruption and inactivity at the site – and potential substantial costs during that period."

But a month before the Scottish Government stepped in in August, last year, FMEL raised concerns in a letter seen by the Herald about the secret negotiations with HCCI and that it might compromise their attempts to avoid insolvency and pursue what they described as "the solvent solution".

After falling into administration in August, last year, the former managers subsequently accused the Scottish Government of having no serious intention of leaving it in private ownership while being warned nationalisation would be subject to EU state aid laws.

They accused ministers of forcing it into insolvency by rejecting a plan that would avoid any state aid claim, save the taxpayer at least £120m and prevent the costs of building two key lifeline ferries soaring to over £230m.

They registered concerns in a letter last year, a month before FMEL went under and ministers took over.

It said: "The Scottish ministers have repeatedly reassured the directors of FMEL that they are working together with FMEL to pursue and implement a solvent solution for the group [through the purchase of shares in FMEL] to secure the successful completion of the [ferry vessels], the protection of employment and a viable future for the shipbuilding at the yard.

"The Scottish ministers have also confirmed to the directors of FMEL on a number of occasisons that the Scottish ministers are discussing matters with FMEL on a transparent basis.

"We are therefore extremely disappointed that, despite repeated requests by FMEL for more clarity on the structure of the solvent solution, the Scottish ministers have failed to share with FMEL that, during the due diligence process, a compromise with HCCI is being sought as part of the solvent solution.

"This development has raised some serious concerns for the directors of FMEL around the transparency and deliverability of the solvent solution which the Scottish ministers have repeatedly confirmed to FMEL they are pursuing, and ultimately, whether the solvent solution is a bona fide, genuine proposal which will in fact be delivered by the Scottish ministers."

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Just over two weeks later, and just two weeks before FMEL went into public hands, directors hit out in a follow up letter at what it called "a lack of answers" and a lack of commitment to the solvent solution.

It claims that Scottish ministers actions had compromised its position with HCCI.

"In fact the position has been so seriously compromised that HCCI have felt it necessary to take action which may ultimately result in FMEL entering an insolvent process.

"Adding to our concern is the advice in your most recent letter that an agreement with HCCI is now a 'key factor in any solution that allows the business to continue to trade'. "As directors we have been excluded from the discussions among HCCI, CMAL and the Scottish ministers and are therefore extremely concerned that we have no visibility on a matter which has a direct impact on FMEL."

It said that without answers, they would have to consider whether it would in the best interests of creditors to continue to trade.

The Scottish Government has said the case for intervention was heavily influenced by the fact that the "Scottish public sector is the major customer of the business with specific and important contracts in place" for the two long-delayed ferries.

"Other factors which impacted on the decision to intervene included the impact on the affected island communities and the consequences for employment in the Inverclyde area, which is above the Scottish average on unemployment and has lower rates of economic activity and employment than Scotland as a whole," it said.

"Under public ownership, ministers have full control of the activity of the yard, employment and investment in facilities. This approach will provide much greater visibility and control over the delivery of [the vessels] in particular providing much needed certainty on the costs to completion."

The Herald on Sunday asked the Scottish Government what HCCI paid by way of the "negotiated amount" to be released from the bond but would not divulge the sum claiming it was "commercially sensitive".

It referred to the payment only as a "substantial sum of money".

A Scottish Government spokesman said it would therefore be wrong to assert that £25m was lost to the public purse.

“It is important to note that if CMAL had claimed under the bond then HCCI would have controlled the yard under the terms of the agreement they had with FMEL," said a Scottish Government spokesman.

“This would have meant no certainty around jobs at the yard or the delivery of the vessels - and would potentially have led to major job losses.

“Scottish Government intervention and commitment to Fergusons has saved the yard from closure, rescued more than 300 jobs and ensured that the two vessels under construction will be completed.”.