Banks face NZ$300 million loss on loans to NZ state-owned coal miner

Banks that lent over NZ$300 million to New Zealand state-owned coal miner Solid Energy face big losses after the Government said receivership and eventual liquidation were viable options.

Prime Minister John Key said on Monday he expected the banks to resolve the coal miner's financial problems and ruled out further significant Government support.

Key said a receivership was possible as early as next week for the coal miner, which has already been bailed out twice by Government capital injections and loans over the last two years.

Banks have already endured one restructure of NZ$65 million of Solid Energy debt into convertible preference shares, but a full receivership would be the largest ever by a New Zealand state-owned enterprise.

KPMG commented last year that a Solid Energy restructure would fundamentally change bank perceptions about lending to state-backed bodies, even when Government guarantees were explicitly not available.

Key ruled out a new Government guarantee or loan, along with any fresh equity support for the miner, which said as recently as March it needed a fresh debt restructure unless coal prices rose. They have fallen further since then.

"It's in a precarious position," Key said of Solid Energy at his weekly post-cabinet news conference.

"We've made it clear to the banks that they need to sort the situation out," he said.

Solid Energy owes about NZ$300 million to ANZ, Commonwealth Bank, National Australia Bank's BNZ, Westpac and the Bank of Tokyo-Mitsubishi.

TSB wrote off all its NZ$53.9 million loan earlier this year.

"Because the banks control the process, in a way it's a call for them to make about what the next step is," Key said.

"Liquidation isn't the number one preferred option of the Government, because liquidation is where the company ceases trading, the assets would be boarded up and the assets would be sold to repay the creditors, and there are other options which would find more favour with the Government, but the call is one that would be made by the bankers, because it is essentially their debt," he said.

The Government contributed NZ$155 million in loans and capital injections in October 2013, before agreeing in September 2014 to cover Solid Energy's NZ$103 million land remediation obligations so the company could remain as a going concern.