By Gareth Vaughan
Regular readers may remember my attempts earlier this year to establish the identity of the parties holding $95 million worth of bonds issued by Solid Energy.
Even after an Official Information Act request the financially stricken company itself wouldn't say. And nor would Finance Minister Bill English, with a spokesman for him saying it was "a commercial matter for the company."
So in early April I took the issue to the Office of the Ombudsman, asking for a review of Solid Energy's decision to withhold the names of the bondholders, the interest rates it's paying them, and the covenants (loan conditions) of these bonds. The Ombudsman is able to investigate decisions made by government agencies on requests for official information. (There are currently two actual Ombudsmen - Dame Beverley Wakem and Ron Paterson).
Given Solid Energy is a State Owned Enterprise likely to require a taxpayer funded bailout, I argued the commercial sensitivities the company cited for withholding the information, whatever these may be, shouldn't outweigh the public's right to know.
Don't hold your breath
Yesterday I received a letter from the Ombudsman. And it's just as well I haven't been holding my breath whilst awaiting a decision. And nor will I start to from now because a decision is clearly still months away.
"Please note that, as of today's date we have over 2,200 complaints on hand and limited investigator capacity. We are therefore not in a position to be able to investigate all of the complaints before us at the same time," the letter, signed by intake and assessment manager Emma Debreceny, says.
"This has meant that we are experiencing delays in progressing some of the complaints before us and, in particular, delays in being able to allocate complaints to the investigators who assist the Ombudsmen."
"At present we have approximately 450 complaints that we have not yet been able to allocate to investigators. Your complaint is one of those awaiting allocation to an investigator. I regret to advise that, due to the pressures of our current workload, it is likely to be some months before we are able to allocate your complaint to an investigator. However, we are making every endeavour to progress your complaint as quickly as we can."
'We will write to you again about the status of your complaint within the next three months."
Three unsecured bond issues
Solid Energy's bonds consist of three medium term notes issued to wholesale investors worth a combined $95 million, with the third and final issue taking place as recently as last November.
Solid Energy's bonds aren't listed on the sharemarket, are unsubordinated and unsecured. The first issue was in December 2009 raising $20 million, the second in March 2011 raising $50 million, and the third in November 2012 raising $25 million. The maturity dates for each of the notes is 7 December 2016, 29 March 2018 and 12 November 2019 respectively. Money raised was used for "general operational purposes."
The balance of Solid Energy's debt, put at about $389 million by the Government in February, is held by banks whose names Solid Energy has been prepared to disclose. They are ANZ, ASB, BNZ, Westpac and Bank of Tokyo-Mitsubishi. The bank loans are also unsecured.
In February English said the Solid Energy board was working with Treasury, advisors and its banks on restructuring options, with the aim of returning the company to a sustainable financial position. This came just weeks after Solid Energy's CEO of 12 years, Don Elder, departed from the company.
Prime Minister John Key has since said his Government won't be letting Solid Energy's banks off Scott-free and they will "definitely" have to wear some losses. And Key has also warned, after receiving a report from potential receivers KordaMentha, that Solid Energy probably has no equity left.
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13 Comments
Ombudsman's office workload has doubled recently - lots of that extra coming from Chch EQ related complaints - and the government continues to underfund the office.
Underfunding seems to be the "modus operandi"
Like the operating budget of the SFO is $9 million pa
Like the operating budget of the FMA is $9 million pa
Gesture politics
They don't want to catch crooks. Just wave the wand and look like they're doing something. Anything
The other day there was an item in the NBR by Chris Hutching in response to an enquiry regarding EQC as to why it keeps cropping up as the villain
Until the earthquakes ECQ was just an investment company with hardly any staff. It has had difficulty setting up a whole new bureaucratic organisation to process claims, which can be very complicated.
http://www.nbr.co.nz/article/brownlee-moves-closer-controlling-christch…
Gesture politics, a great term.
Underfunding is in effect rationing, its a tried and tested method for the health service stretching back 30 years or more. Govn wants to meet its political target of balance in 2014 no matter what damage it does internally to get there....
If you dont need a service then you dont realise you cant get it....or who long you will queue, a long time.
Of course then at some point the Govn steps in and makes it "right", wins some votes but really not much changes.
ECQ is right not to have many staff though, what does it achieve having some hundreds? of staff sitting idle for maybe 20 or 30 years?
regards
Nah, it's not a problem, it's an amusement parlour
It's called the "tweety-pie syndrome"
Tweety Pie is a canary. Tweety Pie is alive and well. Tweety Pie's entire world begins and ends with her birdcage. Sylvester is a cat that exists to amuse her. Grandma, her owner, exists to feed her.
What a good idea .. but and except .. and there is always a but and an except
However - Did you know
If a married couple have drawn up wills, naming the other spouse as the beneficiary, and are then involved in a motor vehicle accident in which they are both killed instantly, the question arises, who deceased first. This used to be a burning issue in the days of estate duties, because the estate of one passes to the other, copping two lots of death duties along the way. Now Taxation Law, Trustee Law and Estate Law got around this conundrum by using a simple device that declared each pre-deceased the other -
Now apply that concept to the EQC
Everybody who suffered damage to their property all at the same time on the same day. Sure there could have been a time elapse between the damage to one property and another, but for all practical purposes as far as the law is concerned, they ALL predeceased the other, ALL on the same day.
Each claimant is entitled to simultaneous satisfaction in being assessed and settled, and repaired
And yet EQC has adopted a selective preferential sequential system of "when we get around to it"
The Lawyers should be taking the EQC to High Court and ask the court to determine a date of death, a date of assessment, and a date of settlement, which then becomes the the standard benchmark against which all claims are to be measured, and anything done after that, entitles the claimant to liquidated damages.
Wonder how the EQC and Government would handle that little joyride.
Hey Andrew Hooker .. where are you?
I was initially going to state that perhaps the public interest element of this might outweigh the individual concerns of those in Chch, but then I am unsure of how much importance should be placed on this information. Stephen L below is a step ahead of me in his comment below so perhaps my initial intuition in this is accurate.
I guess the risks have to be weighed in prioritising. What are the risks to the public of not knowing the information Gareth seeks? Is there collective risk? Whereas I see people in Chch didn't fully appreciate the risks when they built or bought a house on a swamp, so they have to take some responsibility for that. I guess EQC took their money, so they should front up regardless. Is there collective risk for those in Chch?
Gareth,
The importance of your question has dawned on me. Keep at it. One suspects of course that the answer is not so much commercially sensitive, or private, as commercially and politically embarrassing.
It is a minor cop out, but you could ask what categories of investors they are, rather than the specifics.
E.g. private individuals or corporations or quasi government entiities? New Zealand based or foreign based? If foreign, what is the mix of countries of domicile of the investors?Financial fund type investors; or trade investors, or investors with a probably different agenda?
What are the likely consequences, if any, of defaulting on these bonds?
Well done, and don't let it drop.
Cheers Stephen. I did ask around when I did my initial story earlier in the year and it seems these bonds aren't held by any of the major fund managers, ie not ACC or AMP. Given they're unsecured, there ought to be some reasonable sized haircuts when Solid Energy is restructured...
Phone call 6 months later ..
ring, ring, ... ring, ring, .. ring,ring
Hello: Ombudsmans Office
Yes, Gareth Vaughan here from interest.co.nz
I would like to talk to the intake and assessment department please
certainly sir, one moment sir, transferring you now
ring, ring, ... ring, ring, .. ring,ring
voice response unit
we are very busy at the moment, you have been placed in a queue ..
your call is very important to us .. please wait ..
one of our officers will be with you shortly (repeat a few times)
gentle music for 10 minutes
Hello: Intake and Assessments Office
GV: yes, Gareth Vaughan here, could I talk to Emma Debreceny please
Ombudsman's Office: I'm sorry sir, Emma Debreceny is no longer with us .. she left 5 months ago
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