Directors of Phoenix Venture Holdings, the former owner of MG Rover, have dipped into their own pockets to settle a compensation claim by 53 former workers.

The directors, John Towers, Peter Beale and Nick Stephenson, have lent the company £750,000 on an interest-free basis, it emerged yesterday .

They have done so in order to avoid a long and costly legal battle by settling the claim out of court, a spokesman for the three men said.

The case centres on 53 computer workers who claim they were employed by PVH, not MG Rover, when the Longbridge carmaker went into administration in April 2005.

Because of that they should have received compensation for redundancy from PVH.

The company, which avoided going into administration along with its manufacturing operations and which is being kept going until assets can be sold and the money put into a trust fund for displaced Longbridge workers, initially denied the claim.

But the matter was settled out of court last month and the former workers received an average of £10,000 with a similar sum to follow, some of which may be paid by the Government redundancy fund. "Rather than take this to a long drawn out court case, which could have been expensive for either party, it was decided to settle," the spokesman said.

PVH said the three directors who put up the money expect to be repaid when the MG Rover administrators make a dividend payment.

The firm claims it is owed some £32.2 million, which on the basis of an expected 3p in the pound pay out means it will receive about £966,000.

PVH is managing money raised from the sale of assets such as Studeley Castle, the stately home used as a conference centre, and former MG Rover dealership sites.

The cash will ultimately be handed over to the trust fund but directors have delayed doing so during the Department of Trade and Industry inquiry into the MG Rover crash on legal advice.