MERSEYSIDE Special Investment Fund (MSIF) could lose £2m after the collapse of Newton-le-Willows-based White Building Services.

The Pier Head-based venture capital investor injected £1.3m of equity into the business from its venture fund and lent it between £600,000 and £700,000 from its mezzanine fund. But the construction company was placed into administration on January 7 this year with the loss of 181 jobs after cash flow problems, believed to be caused by late payment by clients.

Joint administrators Dermot Power and Tracey Pye, from the Manchester office of BDO, are now seeking to sell the business in a bid to realise some returns for creditors, including White’s bank Halifax Bank of Scotland (HBOS), now part of the Lloyds Banking Group, and MSIF.

However, any return for creditors will depend on the price that the joint administrators are able to agree with a potential buyer. A BDO spokeswoman declined to comment on what progress the joint administrators have made so far in their search for a buyer, saying: “It’s too early to say anything yet.”

But Mark Fuller, managing director of Alliance Fund Managers (AFM), which controls MSIF, said he was hopeful a sale could recover some of MSIF’s investment in the firm.

He admitted: “We don’t know until the business is sold what our exposure will be. It depends on the sale price.”

But he added: “We might make a recovery.”

MSIF was established in 1996 with the aim of providing equity and loans to small firms that were deemed “too risky” for conventional bank loans.

AFM manages all investment decisions and the portfolio of investee businesses for MSIF’s four investment funds. It also provides business support services to help investee businesses develop and grow.

MSIF’s funds ceased investing on December 31, 2008.

However, AFM negotiated an extension to some existing facilities totalling £4.6m.

This will allow the MSIF small firms and mezzanine funds to continue to provide loans to businesses based in, or prepared to relocate to, Merseyside up to March.

In the last published accounts of White Building Services for the year ended September 30, 2008, managing director Stewart Bonnette praised the backing of MSIF and its bank.

“We continue to benefit from a good relationship with MSIF and HBOS,” he said.