December 2013
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House of the Year Awards 20-page liftout
Solid Energy viable - Japan bank Hugh de Lacy Solid Energy’s underlying business model is as valid now as it was before the company hit the wall in February this year owing $370 million to a consortium of six banks, one of them, the Bank of Tokyo-Mitsubishi, told the Auckland High Court last month. The Bank of Tokyo-Mitsubishi is one of the state-owned collier’s two biggest creditors and the only non-Australasian one. Both it and the Bank of New Zealand are owed about $80.1m each, Taranaki Savings Bank $68.8m, Westpac $55.6m, ASB $45.1m and ANZ $40.1m. Tokyo is the only hold-out against the Government’s recovery plan for Solid Energy which
involves the banks swapping $75 million of their debt in exchange for redeemable preference shares whose chances of redemption at this stage look remote. For its part, the Government will buy another $25m of preference shares and provide the company with a $130m secured credit line. But the Bank of Tokyo told the court that Solid Energy’s crisis was a cash-flow problem rather than balance-sheet insolvency, and that it will not have a lasting impact on the company’s medium to long-term viability and profitability. Accordingly the Government, as sole shareholder, should be funding the recovery instead of forcing the banks to take virtually worthless shares in exchange for debt. Jim Farmer QC., acting for the bank, told the court that far from being cash-strapped and in
terminal decline as suggested by a KordaMentha report to the Government, Solid Energy’s most recent accounts showed positive equity of nearly $92m for the 12 months to June this year. Farmer described the Government’s insistence on its proposed deal as “High Noon stuff,” and said the bank wanted the Government to return to the negotiating table. The bank believed the Government, as sole shareholder, should fund the company’s recovery, and was confident that over time it would get back the money it has invested in it. The Government’s proposal requires 75% support from the creditor banks, and Tokyo warns that implementing the deal will cause trade problems between New Zealand and Japan. Solid Energy is sitting on valuable resources of scarce high-grade coking coal, an essential
ingredient in the global steel-making industry, which itself is on the cusp of expansion as the world emerges from the 2008 Global Financial Crisis (GFC). Exported coking coal comprises half of Solid Energy’s four million tonne annual production – the rest is thermal coal for domestic industries – and is presently worth about $US140/tonne compared to $US290/t before the GFC. Even at that level Solid Energy is profitable, Tokyo says, and any rise in steelmakers’ demands for coking coal will make it more so. The bank’s argument implies that the Government has written Solid Energy off in the face of the Labour and Green Parties’ opposition to coal-mining on environmental grounds, even though the company is capable of working through its difficulties over time.
Movement in Auckland office market Chris Hutching Several large commercial property deals have been settled in Auckland over the past couple of weeks. CBRE broker Warren Hutt has concluded the sale of 280 Queen St, Auckland to Singaporean interests for $51 million on an 8.5% yield, reflecting some underwriting by the vendor to account for a vacant floor. The vendor of the 15-level building was Hamburg pension fund Real Estate Neuseeland Gmbh & Co Kg, which has other office investments in central Auckland. The fund bought the 1970’s building in 2007 for $51.5m after it had been refurbished. It has a new building code seismic rating of 133%. Mr Hut says Asian buyers are emerging again after an absence of several years following the 2008 financial crash. The deal comes hard on the heels of the recent $92m purchase by NZX-listed Goodman property Trust of the new Fonterra headquarters under construction on Fanshawe St, Auckland opposite Victoria Park. At the same time, 203 Queen St, Auckland is also under contract to Asian buyers after a marketing campaign by John Binnings of Jones Lang LaSalle. However, the biggest deal of the year was the acquisition by NZX-listed Precinct Properties of HSBC Hse at 1 Queen St for $103m in March.
INSIDE
Showing off the strength of steel... Exposed external steelwork is a feature of the new Manukau Insititute of Technology (MIT) tertiary campus and Transport Interchange building in Auckland. The five-storey building is scheduled for completion next year. Designed by Warren and Mahoney Architects, the exposed steel diagrid structure is a key structural element - providing bracing to the building
Lifting the lid on Pike River PAGE 2
Celebrating the best in joinery - PAGE 3
and supporting the floors - as well as an architectural feature. Steel Construction New Zealand says the MIT building is further indication of the increasing use of new steel techniques in commercial construction. SCNZ is is finalising plans for the establishment of an accreditation scheme for New Zealand’s structural steel fabricators. Story - page 5.
Steel scheme in the pipeline - PAGE 5
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