New Zealand bails out stricken state coal miner, bank lenders hit
WELLINGTON (Reuters) - The New Zealand government said it will pump up to NZ$155 million ($128 million) into Solid Energy SELNZ.UL and private lenders will swap some debt for equity under a plan to save the troubled coal miner, which is slated for partial privatization.
The proposed restructuring plan will see the state-owned company issue NZ$100 million of redeemable preference shares, with key lenders exchanging NZ$75 million of debt for equity and the government injecting NZ$25 million.
The government will also pump in up to NZ$130 million in working capital and reserves, repayable in three years, Finance Minister Bill English said in a statement. The plan will be confirmed by the end of the month, he added.
The rescue plan came after the miner axed more than 700 jobs, cut production and closed mines to counter a downturn in the international coal market and slump in prices.
"We were prepared to provide support for the company if there was a reasonable chance it could be made viable, and we expected the lenders to also contribute to that recovery," English said.
Solid Energy, which only two years ago was valued between NZ$1.7 billion and NZ$2.8 billion, had NZ$381 million in bank debt and bonds as at June 30.
Among the company's lenders are the main New Zealand banks, all Australian owned - Westpac Banking Corp (WBC.AX), ASB Bank (CBA.AX), Australia and New Zealand Banking Group Ltd (ANZ.AX), and the Bank of New Zealand (NAB.AX), while the small, regional TSB Bank has disclosed that it is a bond holder.
Solid Energy produced mostly semi-soft and hard coking coal from mines in the central North Island and on the west coast of the South Island, much of which went to India and China.
"We believe that the company has a good operating future and we hope that with the continued support of our shareholder and our funders, we can re-establish the company as a major employer and economic contributor in our key coal mining regions," Solid Energy chairman Mark Ford said.
Earlier this week, Prime Minister John Key repeated that Solid Energy would not be sold in its current state and this would reduce the amount raised through its privatization program.
(Reporting by Gyles Beckford; Editing by Stephen Coates)
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