Rising international coal prices are unlikely to rescue Solid Energy, if a prediction by Moody's Investors Service turns out to be correct.
Moody's expects excess coal supplies will mean continued weak prices for the commodity over the next 12-18 months, causing significant financial stress on a number of coal producers in the Asia Pacific.
The Government on Tuesday announced that Solid Energy's bankers will take a $75 million haircut on the debt the state coal miner owes them.
That is in return for the Government putting in another $25 million of equity and providing Solid Energy with loans totalling $130 million, which should make it less likely the coal company will collapse.
ASB, Bank of New Zealand, ANZ Bank and Westpac were owed $286 million at 30 June and a further $95 million was owed to holders of medium-term notes, which are like bonds.
A Treasury spokesman said TSB Bank, which was the largest owner of the bonds, would also participate in the $75 million haircut to an unspecified degree.
The five banks will swap the $75 million for shares which don't have voting rights and which won't pay any dividends.
These shares may be repaid at some unspecified future date but only at Solid Energy's discretion.
For the deal to proceed, the bond holders, who currently rank equally with the banks and whose ranking won't change, have to approve it.
It could have been worse. The bonds, which mature in March 2018, last changed hands at a large discount to their face value.
Harbour Asset Management fixed interest portfolio management head Mark Brown said the offer documents for the bonds of state owned enterprises usually explicitly stated they were not guaranteed by the Government.
"When you buy a bond issued by an SOE (State-Owned Enterprise) in New Zealand - a common example is an electricity company - it's fairly clearly stated that the bond is not guaranteed," Mr Brown said.
However, you did get an extra yield for investing in those bonds which was above the government bond rate, and that as to compensate for the risk of default, he said.