The proposed management buyout of Donside Paper Company has hit trouble following the withdrawal of one of the backers supporting the MBO (PrintWeek, 27 April).


Iain Bennet, joint receiver and partner at PricewaterhouseCoopers, confirmed that a backer had pulled out, but said he had been assured by the MBO team, headed by managing director Mike Duckett, that a new funding source was now in place.


Rumours had also been circulated that the deal had fallen through after Scottish Enterprise Grampian (SEG) chief executive Ed Gillespie issued a statement "expressing disappointment at the closure of the mill".


SEG is understood to have been "involved in the background" during negotiations, but as PrintWeek went to press no one from SEG was available for comment.


"I cant think why he issued this statement, but I can confirm it is wholly untrue," Bennet said.


"What I am aiming to do now is get revised heads of agreement in place by the middle of this week."


Bennet said that problems had arisen following an assessment of the treatment of the plants effluent.


"Over the last two months discussions have taken place as to possible solutions to this matter," he said.


The company will need to spend 1.5m-2.5m on improving its treatment on effluent.


It is understood that the new backers for the MBO are aware of the costs involved.


"At the end of the day I think everyone recognises the need to conclude this deal, otherwise the business will be at risk," said Bennet.


Donside went into administrative receivership in December last year, with the loss of 113 jobs, only a month after former chief executive Bill Gore had stepped down after putting together a restructuring package.


Story by Andy Scott