Debt frozen on NZ state owned coal miner 14 August 2015 3:55PM Bernard Hickey Banks face losing interest payments on more than NZ$300 million worth of loans to New Zealand state-owned coal miner for more than two and a half years under a proposal from the Government.New Zealand Finance Minister Bill English announced on Thursday that Solid Energy would be put into temporary voluntary administration for five weeks to give the business breathing room to agree a "freeze" on debt owed to banks and other non-trade creditors ahead of a controlled sell-down of assets.Solid Energy owes more than NZ$300 million to ANZ, Commonwealth Bank of Australia, National Australia Bank's BNZ, Westpac and the Bank of Tokyo-Mitsubishi. New Zealand's TSB wrote off all its NZ$53.9 million loan earlier this year.Banks have already endured one restructure of NZ$65 million of Solid Energy debt into convertible preference shares and this type of 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.English said the board of Solid Energy had put the firm into voluntary administration to be managed by Korda Mentha ahead of a mid-September meeting of creditors. He said Solid Energy hoped creditors would agree to an exit from administration and an orderly sell down of its assets over the next two and a half years while interest payments were suspended."It is no secret that Solid Energy has faced significant financial hurdles - both from the falling international coal price and its debt burden," English said."Despite taxpayer support to date, these factors mean the company in its current state is not financially viable," he said."Entering temporary voluntary administration, and freezing a portion of its debt, provides the best chance for parts of the business to continue to successfully operate in the future, under new ownership."Under the proposal, Solid Energy would remain solvent during the two and a half year sales process and continue to operate as per normal, under its existing Board of Directors, English said.Employees and trade creditors would continue to be paid on a business-as-usual basis, he said."The international coal price has fallen from over $320 USD per tonne in 2011 to around $85 USD per tonne now. Forecast recoveries in the price have repeatedly failed to eventuate. This means there is no prospect of Solid being in a position to repay or refinance its bank debt, or invest for the future."The Government had previously ruled out further support, having already contributed NZ$255 million in fresh equity and loans over the last two years.