Solid Energy creditors vote in favour of 2 1/2-year wind-down plan

Thursday 17th September 2015

Creditors of New Zealand's failed state-owned coal miner Solid Energy, have voted in favour of an orderly sell down over the next 2 1/2 years, rejecting a last minute foreign bidder's request to delay the watershed meeting ahead of a possible buyout.

Korda Mentha administrator Brendon Gibson said a move by Australian company Mach Capital to adjourn today's creditor meeting while it completed due diligence and make an alternative offer was rejected when creditors "overwhelmingly supported" the deed of company arrangement (DOCA). Still, Mach would be able to participate in the sell-down of Solid Energy's assets, he said.

The DOCA will see Solid Energy's day to day creditors and employees paid in full while debt owed to other creditors, including the bank and bondholders, will be paid over the next 2 1/2 years, the miner said in a statement.

“It is not unusual to receive such an approach in an administration, but it is unusual after the formal administrators’ report has been issued," Gibson said in a statement issued after the vote. "This approach has not changed the process. The watershed meeting has proceeded as planned. The meeting was advised of the approach made to us and this matter was dealt with within the meeting”.

The DOCA envisages all obligations to staff and trade creditors being paid in full, while rehabilitation costs at mine sites are covered by an indemnity negotiated last year with the government, with a cap minimising risk to local councils.

The company was placed in voluntary administration last month after concluding it had no realistic prospect of refinancing $239 million of debt facilities due to mature in September next year. The company's downward spiral began in 2013 when slumping global coal costs exposed its commercial error in carrying substantial debt on its balance sheet to pursue a variety of novel energy projects that a previous board and management believed would give the business a future beyond coal extraction.

Little is known about Mach Capital, which was registered with the Australian Securities and Investment Commission last week and today changed its name to Global Resources Partners. Earlier today, BusinessDesk reported Mach Energy was the entity which lodged the offer, having registered with ASIC in October last year. Its website is under construction and publicly available ASIC records give no clue to its ownership, although its backers are understood to be Asian investors looking for opportunities in the coal sector created by the global slump in coal prices that have forced Solid Energy into administration for break-up.

Korda Mentha's proposed DOCA was unveiled on Sept. 10. At that time it had the support of a wide range of banks, local authorities and creditors including KiwiRail and Fonterra Cooperative Group, based on its potential to return between 35 cents and 40 cents in the dollar following an orderly asset realisation process, for which the banks would extend a two and a half year moratorium on debt repayments.

It is understood the Mach bid would have offered employees and trade creditors the same certainty of full payment as the Korda Mentha plan and would seek to buy out bank and non-trade creditors immediately. The administrators had earlier warned that immediate liquidation of the insolvent coal miner would likely yield just 15 cents to 20 cents in the dollar.

BusinessDesk.co.nz

Comments from our readers

No comments yet