27 Nov 2013

Court told Bank refused to negotiate

8:39 am on 27 November 2013

The High Court in Auckland has been told Bank of Tokyo Mitsubishi refused to negotiate any rescue deal for Solid Energy that involved writing off its debt.

The Japanese bank is challenging plans to restructure Solid Energy with a debt-for-equity swap involving the main lenders.

Under the deal, five banks, including Bank of Tokyo Mitsubishi, would take a haircut or write off some of their debt in return for a total of $75 million worth of non-voting, redeemable, preference shares in Solid Energy. The Government would acquire another $25 million worth.

But Solid Energy lawyer Alan Galbraith, QC, told the court on Tuesday that Bank of Tokyo was not prepared to negotiate on its position and threatened to thwart all efforts to put a managed resolution in place.

The bank made it clear it would not take any write-off of any debt, let alone a debt-for-equity swap, and it expected the Government to pay the bank out for all the debt that would be compromised.

The bank's non-negotiable position contradicted the way it was portrayed earlier in court by the bank's lawyers, Mr Galbraith said.

It had also threatened publicity, and referred to a threat to the Crown's position in international markets and with Asian and Japanese investors.

The court was told the bank did not want Solid Energy liquidated because it would get back only $24 million or less of the $80 million.

But Mr Galbraith said it wanted all the other creditors to take a reduction in debt and take all the risks so it could reap more benefits.

But the Bank of Tokyo Mitsubishi said the rescue deal for Solid Energy was unfair because some creditors were not required to write off some of their debt.

The bank told the court it was forced into a deal over which it had no control and it would be subsidising other creditors who did not have to take the pain by taking a haircut.