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Wednesday
22 October 2014
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Griffin may have been trading while insolvent

GRIFFIN Coal directors could be called to account if the company’s administrators finds it traded while insolvent. Put crudely, directors can be held liable if it is found the business was trading while insolvent.

KordaMentha partner Brian McMaster centre and partner Scott Kershaw on the right.

A meeting of the coal miner’s creditors was told its debts total more than $1 billion. Adding to the company’s woes, major customer Verve Energy – the main electricity generator in Western Australia – is considering terminating its contract with Griffin.

Part of the debt is secured against property. About $30 million is owed to Commonwealth Bank and St George Bank.

There also is a $10 million secured debt to a company owned by Griffin Group chairman Ric Stowe.

Stowe, incidentally, was not among the more than 100 creditors and observers who came to the creditors’ meeting in one of the Sheraton Perth Hotel’s ballrooms.

Of the unsecured creditors, the lion’s share is owed to bondholders who are chasing $538 million between them.

These bondholders include Clearwater Capital Partners, Thornburg, Trust Company of the West, Evergreen Investments and Teachers Insurance and Annuity.

These five are understood to be operating in concert. Other bondholders include Credit Distressed Blueline Masterfund, Harbinger Capital and former Precious Metals Australia managing director Roderick Smith.

Unsecured trade creditors account for another $44 million and IHI Corporation is seeking $41 million.

One trade creditor said Griffin Coal was about one-third of his company’s custom.

“I gave my guys the option of leaving last week,” he said. “One of my employees has put money into the business to keep it going.”

There also is a $300 million provision for a tax debt.

Employee entitlements still to be paid include $750,000 in superannuation.

Administrator Brian McMaster stressed he and his fellow administrators were working their way through the claims to identify which were legitimate.

He said the workers would be at the head of the queue, particularly in terms of their superannuation.

McMaster also confirmed that he had received enquiries from several parties looking to buy the business.

“We have to prepare the company [Griffin Coal] for due diligence by these companies,” he said.

McMaster said he was on the verge of giving up on the WA government and Verve Energy’s offer of a $4 million pre-payment for coal supplies.

The matter has become caught up in broader issues between Verve and Griffin.

McMaster would have liked the money because it would have provided him with a buffer.

However, the mine remains operating.

“It costs about $500,000 to run the mine,” McMaster said. “The business is still cashflow positive.

“We are confident we can sell it as a going concern.”

On the insolvent trading matter, McMaster said investigations could take several months to conclude.

A 24-member committee of creditors also has been set up. It is made up of Clearwater Capital Partners, Thornburg, Trust Company of the West, Evergreen Investments, Teachers Insurance and Annuity, Credit Distressed Blueline Masterfund, Harbinger Capital, Mitsui and Company, Cockburn Cement, Perdamen Chemicals, Royal Equipment Inc, Australian Railroad Group West, Australian Metalworkers Union WA secretary Steve McCartney, Construction Forestry Mining and Energy Union WA mining division secretary Gary Wood, Roderick Smith, NAB Capital Leasing, Caltex Australia, Piacentini and Sons, Association of Professional Engineers, Scientists and Managers Australia’s Don Wood, IHI Corporation, TiWest, Bunbury Drilling, Komatsu Finance, and the Australian Tax Office.

McMaster had hoped to keep the group smaller but he accepted the committee as it was.

Earlier, Julian Grill Consulting’s Frederick Suhren – who was once a senior executive within the Griffin Group – attempted to get onto the committee.

So too did six companies linked to Ric Stowe, namely Devereaux Holdings, WR Carpenter No2, WR Carpenter Agriculture, WR Carpenter Properties, Stowe Worldwide Investments Management and Griffin Services.

Griffin Coal competitor Premier Coal had also nominated as a member of the committee.

After a brief adjournment of the creditors’ meeting, Premier withdrew its nomination and a resolution to add the Stowe-linked companies was defeated.

So too was the bid to get Suhren onto the committee. However, McMaster had to use his casting vote at the meeting to defeat that resolution.

JGC is headed by lobbyist and former WA minister, Julian Grill, who was at the creditors’ meeting, along with another former WA Labor politician Norm Marlborough.

Grill said he was a creditor of Griffin Coal but was not sure of the amount. MiningNews.net understands Grill is owed about $26,000.

He said he also had been a long-time consultant to Griffin Coal and other Griffin Group companies.

“Please don’t write that a majority of creditors were against Frederick going on because they weren’t,” Grill told MNN.

“He [McMaster] used his casting vote because there were a clear majority of creditors in favour of Frederick going on but the majority of the overseas bondholders were not.”

Under corporations law, resolutions at a majority of creditors by both number and amount owing is required to pass a resolution.

When there is a conflict, the meeting chairman has the casting vote.

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