Pike River payout avoids legal battle

Pike River CEO Peter Whittall. Photo / The Press

Pike River Coal's receivers say the $80 million deal they've reached with insurers has avoided what could have been a messy legal battle but say planned payments to creditors will be too little, too late for some.

The mine's European insurers have agreed to pay out 80 per cent of the policy which was capped at $100 million to cover damage and lost income from the mine which exploded last year, killing 29 men.

The proposed settlement means the Pike River company's biggest shareholder, New Zealand Oil & Gas, will get about $38.3 million as a secured creditor and $3 million as an unsecured creditor. It had rights to more of the insurance payout but has agreed to a receiver's plan to pay $10.5 million to unsecured creditors.

NZOG's remaining debt would be reduced to $14.7 million secured and $12.1 million unsecured. Yesterday NZOG shares closed up 3c to 71c.

Secured creditor BNZ will receive $23.2m in full settlement and the owners of leased mine equipment, $6.3 million.

Under the early payment plan unsecured creditors will receive a part payment of the first $10,000 of their claim - or their full claim if it is less than $10,000 - and up to 20c in the dollar for any balance above that amount, up to a capped amount of $10.5 million.

On the basis of known creditor claims to date, around 243 creditors will be repaid in full and a further 222 creditors will receive a part-payment.

The proposal must get creditors' approval through a postal vote.

Unsecured creditors would also be in line to be paid in full when the mine is sold but they must agree not to seek to put the West Coast mine into liquidation which could complicate the sales process.

A receiver for PricewaterhouseCoopers, John Fisk, said the insurance negotiations were complex and he was pleased with the result.

"We had a settlement discussion with the insurers and took the view that getting the money sooner without the need to go through what could have been quite an expensive process and potential litigation was an offer that should be accepted."

Fisk said some creditors would not have survived financially.

"That's an unfortunate circumstance that we're hoping to minimise. We do acknowledge there may be creditors who are unable to keep the doors open.

NZOG chief executive David Salisbury says the company recognised the "huge and ongoing impact" the disaster had on the West Coast community.

"Hopefully all of Pike River's creditors can receive full payment when the sale of the mine occurs. However, for the mine workers, contractors and suppliers this has been a very stressful time, emotionally and financially. We therefore support the receivers using some of the insurance payout to make a voluntary early payment now to all unsecured creditors."

Fisk said he was confident the plan would be approved by the necessary 50 per cent in number, 75 per cent in value of creditors.

"We think it's going to be a fairly easy vote for unsecured creditors. Essentially they're not going to be compromising any of their debt. All they're doing is agreeing not to put the company into liquidation at least until after the sales process."

NZOG has a 29.4 per cent shareholding in Pike River and Salisbury said the insurance agreement ticks off one of the primary tasks of the receivers.

The receivers expect the insurance payout around the end of September.

MINE PROGRESS

* Receivers say Pike River Coal is continuing with the mine stabilisation work and is planning the next phase of work to reclaim the access tunnel.
* That is necessary before any attempt can be made to re-enter the main workings of the mine and recover the miners' bodies.
* A handful of potential buyers, including Solid Energy, are doing due diligence before submitting their final bids.