A historic paper mill saved from closure with the help of £7m in public money three years ago received a further £5m in loans before becoming overwhelmed and entering administration.
Hundreds of jobs have been lost at the Arjowiggins Stoneywood plant in Aberdeen despite the millions in support from Scottish Enterprise, the public body that encourages investment on behalf of the Government.
The plant’s future was plunged into doubt in January 2019 after its parent company failed to find a buyer.
But the ancient mill was saved the following September with hundreds of jobs rescued when it was purchased by the existing management team under the name Creative Paper Holdings Ltd.
The management buy-out of the troubled mill was supported by £7m of funding from Scottish Enterprise, comprised of a £6.9m loan and £100,000 in equity investment.
A year after the initial cash bail-out was agreed, a further £3.5m loan was granted to Arjowiggins in July 2020.
The following November, after months of trading in the challenging environment caused by the Covid pandemic, dozens of jobs at the mill were under threat.
But the business continued to operate throughout 2021 and, in January 2022, an additional £1.6m loan was issued by Scottish Enterprise just months before the paper mill would enter administration.
No capital had been repaid as administrators came in and 301 employees were made redundant on Thursday.
However, in line with the agreed repayment schedules, interest has been met monthly on the £3.5m and £1.6m loans.
But capital repayments were forecast to begin this year, according to Arjowiggins Group’s accounts.
Scottish Enterprise said its decisions to support Arjowiggins was based on a view, shared with private investors, that the business had a viable future.
Newly-appointed administrators from Interpath Advisory said the Group has been loss-making since the negative impact of Covid-19, with losses exacerbated more recently by the increases in energy costs and the price of raw materials.
They said there was no other option available other than administration for the historic Group.
Scottish Enterprise said, despite best efforts, it was “not possible to secure a sale of the business as a going concern”.
Alistair McAlinden, managing director at Interpath Advisory and joint administrator, said: “Over the coming days and weeks, we will be exploring options to achieve the sale of the sites and assets and would ask that potential interested parties contact us as a matter of urgency.”
Workers at a the paper mill have been left shocked and devasted after being told they had lost their jobs.
A Scottish Enterprise spokesperson said: “Our interventions helped maintain an important employer’s presence in Aberdeen and protect the jobs of its employees since it first went into voluntary administration in January 2019, as well as leveraging private sector investment into the company.
“Our decisions to support Arjowiggins were based on a shared view, alongside private investors, that the company had a viable future.
“However, conditions deteriorated and despite the best efforts of everyone involved it was not possible to secure a sale of the business as a going concern.”