Solid Energy acting chairman Andy Coupe said the company had faced very challenging conditions and in the face of dramatic declines in the price of hard coking coal, it made significant gains in cost-reduction and operating efficiencies.
But the market had continued to fall and there was still no near-term prospect of any recovery and as a result it is no longer sustainable for the business to trade under its current capital structure, Coupe said.
“We have been upfront with our employees and other stakeholders about the challenges facing Solid Energy. For some months we have been consulting with our banks and shareholder to develop a suitable plan. As a result, the board has structured a proposal for creditors that, if adopted, would result in operations continuing under a Deed of Company Arrangement (DOCA).
“In the board’s view, that is far preferable to an immediate liquidation. The voluntary administration process enables that proposal to be quickly finalised and voted on by all company creditors.”
Solid Energy said it will engage an investment bank and undertake an orderly, managed sale of its assets over the next two-and-a-half years.
The existing board will continue to manage Solid Energy, and be monitored by and reporting to the Deed Administrators and a monitoring committee of certain creditors.
“We believe the proposal has the necessary support from the shareholder and a majority of creditors to be successful. It allows for a managed sell down of the companies’ assets and the prompt payment of all trade creditors’ debt,” Coupe said.
“This is a far more favourable scenario for stakeholders than going into immediate liquidation and for that reason, the board is confident the proposal will be well supported when creditors meet to vote on it.”
Coupe noted that should creditors accept the proposal, the company would be handed back to the directors to oversee the implementation of the sell down process, at the end of the VA period.
“The process has been extremely complex, both legally and commercially, and has taken considerable time to develop to this stage,” Coupe said. “The board has been conscious of the strain on employees and contractors that naturally occurs in times of uncertainty, and has sought to act as quickly as prudently possible.”
From yesterday, the administrators will take full control of the company for a period of five weeks. They will continue to trade the businesses, and will liaise with the creditors on the options for the future of the company.
KordaMentha partner and Solid Energy New Zealand (SENZ) administrator, Brendon Gibson said voluntary administration is a short-term measure that effectively freezes the companies’ financial positions while creditors consider the future.
Gibson said employee entitlements and other costs incurred during the period of voluntary administration would be paid as per normal terms and conditions.
“It is important to note that during the voluntary administration period, it will be business as usual for SENZ and its associated companies. This will include a continued strong focus on health and safety, environmental, community, and commercial matters throughout our engagement,” he said.
