Griffin slow-bleed continues

THE vortex effect created by the $1 billion collapse of Griffin Coal, sparked by its missed interest repayment to overseas bondholders, has already spread to parts of Rick Stowe’s empire previously thought insulated from Griffin’s financial difficulties.

Though its coal and power businesses are perhaps its best known, the Griffin empire extends to beef production, property development, aviation, office stationery and packaging, and horse breeding.

Griffin’s problems were initially limited to six companies directly associated with the group’s coalmines and power stations, which were placed in the hands of KordaMentha administrator Brian McMaster on January 3.

The six comprise Griffin Coal, Griffin Energy, WR Carpenter Holdings, Carpenter Mine Management, Carpenter Mine Management Holdings, and ACN 120 080 684. A seventh, WR Carpenter Australia, was placed in administration two weeks later.

Mr McMaster is now working on a strategy to recover the $1 billion claimed by creditors, including $538 million owed to overseas bond investors. His preferred strategy is a recapitalisation or sale of Griffin’s core energy assets, notably the Muja and Ewington coalmines at Collie, and the nearby Bluewaters 1 and 2 power stations, either together or asset by asset.

But the complex interrelationships between the various arms of the Stowe empire, involving cross guarantees, intercompany loans and other dealings, has spread the rot inexorably outwards.

In the immediate aftermath of Griffin Coal’s collapse, a fire-sale of property assets held by other Stowe entities began in earnest.

First to go was a prime beachfront property in Swanbourne, which was sold by top end property agent Willie Porteous for $7.85 million within 72 hours of listing.

Mr Porteous was also engaged to sell the Stowe family’s sprawling Devereaux Farm property at Bullsbrook for $70 million.

The 2,471-hectare property, at which Prince Harry famously played polo in 2003, houses a palatial residence, guesthouse, helipad, polo fields and polo stud.

At the same time, Mr Stowe put his prime 4,800ha Studleigh beef property, near New Norcia, on the market for $15 million.

Yet in a sign of how quickly Griffin Coal’s financial contagion has spread, Commonwealth Bank last month moved to protect its $80 million exposure to the broader Stowe empire by appointing receivers to three Stowe property companies – Devereaux Farm Pty Ltd, WR Carpenter Properties Pty Ltd and BB Villas Pty Ltd.

WR Carpenter Properties was associated with several major property projects, including the huge Roselea Estate in Stirling, where the last residential lot was sold in 2006.

The receivers have now seized control and plan to sell the Bullsbrook property and five strata-title units still held by the group at the exclusive Bunker Bay resort developed on former Griffin land near Dunsborough by Mirvac Group in 2004.

Surprisingly, the bank did not appoint receivers to an adjacent 16ha oceanfront development site at Bunker Bay over which it has a $28 million charge.

In what was clearly an indicator to his ailing finances, Mr Stowe put the development property on the market for $20 million in October.

Similarly, it has since emerged that the City Square development site on Mounts Bay Road, where Griffin had planned to build a new $350 million, 14-storey corporate headquarters, has been on the market for several months.

There have also been early worrying signs that Griffin’s woes could have a knock-on effect at the group’s lucrative and profitable beef production and export business.

Griffin’s WR Carpenter Agriculture division is one of the state’s leading premium beef exporters, most notably of Wagyu marbled beef prized in Asia.

The beef division owns around 300,000ha of prime grazing land across WA, on which it runs a herd of about 40,000 cattle, mostly Angus beef cattle, including some 20,000 breeders.

Its main pastoral property is the massive 275,000ha Minilya station near Coral Bay in the Pilbara, where it runs a large part of its herd.

It also owns 25,000ha around Cataby and Moora, taking in the the Cantabilling Springs, Joanna Plains, Dandallen Farm, Emu Downs and Studleigh properties, where it typically fattens its cattle before slaughter.

The group also runs cattle on two small properties, Bluewaters Farm and Chicken Creek, near its mines in Collie.

Though its beef operations have not yet been caught in the storm, the forced sale of Studleigh is a sign of the potential complications Griffin’s collapse could have.

There have also been other signs of trouble within the business.

At the 8700ha Joanna Plains farm near Cataby, the company secured shire approval in 2008 for a $10.5 million beef processing plant that could process up to 13,000 cattle a year.

Though the abattoir building has been constructed, it remains empty and WA Business News understands that fit-out and completion has been deferred indefinitely, primarily due to funding constraints.

With the benefit of hindsight, past decisions by other Griffin businesses also now seem to hint that the group’s troubles were a long time coming.

In 2008, Griffin cancelled a proposed $400 million gas-fired power station at Neerabup, blaming a shortage of competitive gas supplies.

Similarly, a $250 million wind farm at Badgingarra has been deferred until at least 2012 ostensibly due to a lack of capacity on the state’s main transmission grid. The 130-megawatt facility, a bigger sibling to Griffin’s nearby Emu Downs wind farm, was approved by the Dandaragan shire in 2008 and was originally scheduled to come on stream this year.

Griffin is also believed to have quietly shelved early stage plans for a 400-megawatt gas-fired power plant at the Oakajee industrial estate, though it has said virtually nothing publicly about its interest in the proposal.

Pre-dating any of these decisions, the group offloaded US-based crane and elevated work platform manufacturer UpRight Inc to UK-listed Tanfield plc for £6.8 million in mid 2006 after years of sliding returns.

That was followed in 2007 by the sale of the industrial packaging and paper bag manufacturing arm of Griffin’s Dalton Packaging division in Sydney.

However, its Dalton Office Products business remains a major division, and is the national marketer and distributor of the Pilot Pens, Sellotape and Safe-T-Pak stationery brands.

WA Business News has also confirmed that the Griffin Helicopters charter business at Perth Airport continues to operate unhindered by the collapse and is taking bookings for its fleet of six helicopters.