Solid Energy banks got a trim not a haircut

John Key has folded yet again in negotiations with big corporates, and backed away from his threat of a haircut for Solid Energy’s banks, says Labour’s SOEs spokesperson Clayton Cosgrove.

“In March John Key tried to lay down the law to Solid Energy’s banks, saying: ‘The banks will definitely have to wear some of the loss. If anyone thinks that we're just going to accept all of the loss and let the banks off scot-free, they need to think again’[1].

“Just like with Rio Tinto and Chorus negotiations, John Key’s bark is much worse than his bite. Yet again he is all talk and no action. John Key promises big but delivers little.

“The four banks have had $75 million of their debt turned into $75 million of redeemable preference shares. The main loss they take is foregone interest on the debt.

“That’s not a haircut, it’s a trim off the fringe. Instead it’s the taxpayer that’s been scalped, having to fork out an extra $155 million. Yet again National has folded under the pressure of negotiations.

“Time and again after Government negligence John Key tries to hide the seriousness of the problem by saying he will sort it out. But he fails to deliver. Just like he promised a mortgage lending limit exemption for first home buyers but failed to bring it in, this time he failed to make the banks carry the can for their lending.

“National was warned time and again over four years that Solid Energy was in trouble, but ministers refused to listen and took no action. Their hands-off approach meant they completely ignored the warning signs. Their inaction ran the company into the ground.

“In 2008 Treasury first raised concerns about Solid Energy’s valuation. In November 2010 an independent valuation said the company was worth half what it claimed. The UBS scoping study in 2011 raised serious concerns about the company. The company was put under month-to-month reporting In June 2012.

“All the while ministers did nothing apart from take dividends out of the company. The $144 million in dividends paid out over four years is remarkably similar to the $155 million taxpayers have to fork out now.

“Kiwi taxpayers shouldn’t be paying for the Government’s mismanagement. It has been over a year since Bill English and Tony Ryall announced that Solid Energy was in crisis. In that time 700 jobs have been lost and one mine mothballed. What a waste. It should never have come to this,” says Clayton Cosgrove.

ends

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