The Government has loaned stricken state owned coal miner Solid Energy $100 million and extended a further $30 million standby facility as part of a restructuring package announced this morning.
Finance Minister Bill English and Minister for State Owned Enterprises Tony Ryall said the package had been agreed between the company, the Government and key lenders.
"As we have said previously, ministers were not prepared to expose taxpayers to on-going losses if Solid Energy's core business was not considered viable," English said.
"However, we also said that 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," he says.
The proposal includes:
• A restructuring of the bulk of the company's bank facilities.
• The company issuing $100 million in non-voting redeemable preference shares - $75 million to key lenders in exchange for part of the debt owed to them, and $25 million to the Crown in exchange for cash.
• A secured working capital loan of $50 million provided by the Crown, repayable within three years.
• A secured land mortgage of $50 million provided by the Crown, repayable within three years.
Ministers had also agreed to a secured standby facility of up to $30 million, provided by the Crown, if required.
Ryall said the company "still has a lot of work to do, and market conditions remain challenging".
"The proposed restructuring will give the company more time to work through the issues it faces, as it continues to focus on its core coal business."
Holders of the company's medium term debt were being asked to agree to waive some of their rights to enable the company to put the financial restructuring proposal forward to lenders, Ryall said.
"The process to formally adopt the proposal is now underway and is expected to be complete by the end of the month."
English said the Government's financial statements for the year to June 30 2013, to be issued next Monday, will include the financial impact of the proposed agreement, including the $25 million cash injection and $100 million of loan facilities and the $30 million standby facility.
Solid Energy said its board had agreed in principle to the proposal.
As at the end of June the company owed $381 million - $286 million of bank debt and $95 million in medium-term notes.
The proposal, facilitated by the Treasury, would be formally considered by the company's banks over the next two weeks.
The company wold also seek the co-operation of its note holders.
Chairman Mark Ford said the proposal "would allow the refocused coal mining business to trade its way back to profitability over the next few years, but that this would have to be supported by ongoing efficiencies and cash generation and improvements in the international coal market''.
"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.
"These communities have been severely hit by the company's financial misfortunes in the last year, including the loss of more than 700 jobs, and we hope to be in a position to reinvest in our operations when there is a sustained improvement in the market.''
But Labour state owned enterprises spokesman Clayton Cosgrove said the package was "too little, too late and comes at a cost of up to $155 million to the taxpayer''.
"Kiwi taxpayers shouldn't pay for the Government's bungling. It has been over a year since Bill English and Tony Ryall announced that Solid Energy was in crisis. Over 700 jobs have been lost, one mine mothballed and nothing achieved in the past 12 months.
"Despite today's announcement Kiwis are still left in the dark on how much the failure of Solid Energy has cost them. National must come clean and tell us the full cost.''