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Industry Titans Offer £30m Forgemasters Aid

Three of Britain's industrial titans have handed a secret £30m support package to Sheffield Forgemasters, the steelmaker which is a critical supplier to the Trident (BSE: TRIDENT.BO - news) nuclear submarine programme.

Sky News has learnt that the Ministry of Defence (MoD) brokered a deal several weeks ago under which BAE Systems (LSE: BA.L - news) , Babcock International (LSE: BAB.L - news) and Rolls-Royce Holdings agreed to underwrite bank loans to the steelmaker.

Sheffield Forgemasters has been hurt by the broader crisis affecting the steel industry, with thousands of British jobs disappearing in the past four months.

The company has seen dwindling revenue from customers in the oil and gas sector, and last week cut 100 jobs in a move described by its chief executive as essential to a turnaround plan that will be partly funded by the new loans.

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Sources said on Friday that Submarine Enterprise Partners - the entity responsible for delivering the replacement fleet of nuclear submarines and in which BAE, Babcock and Rolls Royce (LSE: RR.L - news) are the corporate stakeholders - had agreed to provide guarantees for just under £30m of loans provided by the US bank Wells Fargo (Hanover: NWT.HA - news) to Sheffield Forgemasters.

The move underlines the critical nature of the reactor casings made by the Yorkshire-based company for Britain's nuclear submarines.

Such financing arrangements involving members of companies' supply chains is far from unprecedented, but will nonetheless attract broader interest given the sensitivity of the Trident nuclear deterrent.

The MoD is said to have intervened to negotiate a solution following reports that a Chinese state-backed steelmaker wanted to invest in Sheffield Forgemasters - a prospect which caused deep unease in Whitehall.

In Sheffield Forgemasters' latest set of accounts - which were overdue when filed this week at Companies House - its chairman, Tony Pedder, said: "The storm clouds which seem to gather periodically over the steel and steel-related sectors are once again evident.

"Of particular concern has been reduced activity in the traditional oil and gas sector, with oil prices down to a level that is deferring much potential new investment.

"This combined with a slowing of global economic growth, has led to a scarcity of orders for our engineering products and an international collapse in steel prices."

The accounts revealed an operating loss of £9.4m for the 18 months to December 2014, although Mr Pedder said Sheffield Forgemasters had "concluded an extension to our financing facility [which] will provide adequate funding for the business through to end March 2017".

Company executives have signalled that they are open to the idea of attracting additional external investment, although they have insisted that such a move is not essential.

Sheffield Forgemasters traces its roots back to 1805, making it one of Britain's oldest surviving industrial groups, and it continues to employ roughly 700 people.

Despite its private ownership, the company has had occasional brushes with political controversy, after Nick Clegg and David Cameron were linked to decisions about Government grants and loans to it.

A BAE spokeswoman said: "BAE Systems works closely with more than 7,000 organisations in our UK supply chain to develop and manufacture advanced defence and security products for our customers.

"Sheffield Forgemasters International is a supplier to our submarines business. The terms of our contractual relationships with our suppliers are confidential."

Babcock echoed that statement, saying: "Babcock works closely with an extensive supply chain across the UK to ensure we deliver best value, continuity and surety for our customers. Sheffield Forgemasters International is a supplier to our business. However, contractual arrangements with our suppliers are confidential.‎"

Rolls Royce declined to comment, while a spokesman for Sheffield Forgemasters said that its financing arrangements were confidential.

The MoD could not be reached for comment.