Solid Energy lender the Bank of Tokyo-Mitsubishi outlines $39.2 mln credit impairment

Solid Energy lender the Bank of Tokyo-Mitsubishi outlines $39.2 mln credit impairment

The Bank of Tokyo-Mitsubishi, one of five bank lenders to beleaguered State Owned Enterprise Solid Energy, recorded a fresh $39.2 million provision for credit impairment in its latest General Disclosure Statement (GDS).

The impairment was recorded in the June quarter after the bank had no impairments at March 31. It pushed the Bank of Tokyo-Mitsubishi to a loss of $23.8 million in the June quarter, versus a profit of $5.1 million in the June quarter of last year when it also had no impairments.

Earlier this week the Government announced a proposed financial restructure for Solid Energy, including a contribution of up to $155 million from taxpayers. As of June 30 Solid Energy had $381 million of debt comprising drawn bank facilities net of cash of $286 million and bonds of $95 million. The bank debt is held by ANZ, ASB, BNZ, Westpac and the Bank of Tokyo-Mitsubishi. It's not clear how much is owed to each bank.

Solid Energy's last annual report said all bond and loan facilities were unsecured.

The proposed restructure would see Solid Energy issue $100 million in non-voting redeemable preference shares with $75 million effectively swapped for bank debt, and $25 million issued to the Crown in exchange for cash. The balance of the bank debt would remain. The Government said a process to formally adopt the proposal was underway and was expected to be complete by the end of October.

The Bank of Tokyo-Mitsubishi operates in New Zealand as a specialist lender to corporates. Its lending includes a $100 million, five-year loan to Telecom announced in March. It also features in one of two consortia short-listed by the Government for the Transmission Gully public-private partnership roading project.

As of June 30 the Bank of Tokyo-Mitsubishi had total assets in New Zealand of just over $3 billion and total liabilities of $2.9 billion.

The GDS doesn't specifically say what the provision for credit impairment relates to. It says provisions are recognised when there is a legal or constructive obligation as a result of past events, it's likely an "outflow of resources" will be required to settle the obligation, and the amount can be reliably estimated.

Michael Ryff, general manager for the Bank of Tokyo-Mitsubishi's Auckland branch, declined to comment on Solid Energy.

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