21/01/2010 - 00:00

Group of six holds the key

21/01/2010 - 00:00


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BONDHOLDERS owed $538 million will be the key to any carve-up of Rick Stowe’s collapsed Collie coal and power businesses.

Group of six holds the key

BONDHOLDERS owed $538 million will be the key to any carve-up of Rick Stowe’s collapsed Collie coal and power businesses.

At last week’s first meeting of creditors, representatives from the top six bondholders were elected to the 21-member creditors committee, which will be pivotal in determining Griffin’s ultimate fate.

The six bondholders elected to the committee comprise Clearwater Capital, Thornburg Investments, Trust Company of the West, Evergreen Investments, Teachers Insurance & Annuity, and Harbinger Capital Partners.

Unusually given the competing commercial imperatives of individual bond investors, Griffin’s bondholders have shown a surprising willingness to work together to protect their investment. That offers both benefits and pitfalls for the administrator and other creditors.

A senior source close to the bondholders said the five biggest bondholders, who jointly hold more than 60 per cent of the bonds, had formed a working group to co-ordinate a strategy to recover their investment.

That group was holding regular discussions with the rest of the bondholders to keep them in the loop and onside.

“What’s unusual here is that the note holders are all very engaged ... over 90 per cent of the notes are represented on each call,” the source told WA Business News. “Under the indentures of the notes you need more than 50 per cent to agree to anything, so it’s a pretty powerful group.”

The source said it was highly likely that the bondholders would come up with their own proposal to recover 100 per cent of their Griffin investment, even if it differed from the course of action preferred by KordaMentha administrator Brian McMaster.

Tellingly, the first question asked of Mr McMaster by a bondholder at last week’s creditors meeting was to check the extent of confidentiality restrictions on members of the creditors committee.

The bondholders also voted together to ensure representatives from several Stowe-controlled entities were not elected to the creditors committee.

The source also confirmed that Griffin bondholders had offered tens of millions in stop-gap funding, both before and since Griffin went into administration, in return for some security over the assets.

“There’s a willingness among the note holders to provide the required funding to make sure the business stays on a good footing and to preserve the value,” the source said.

But they had lost all trust in Griffin’s “recalcitrant and remote” management and believed they were better off dealing with an independent administrator.

A similarly united bondholder group almost derailed plans by administrators to sell Sons of Gwalia’s tantalum business for $205 million to Resource Capital Fund in 2007. Instead, the group proposed to issue creditors with shares in the business ahead of public float.

Though the bondholders summoned the most votes by value, more creditors voted for the RFC proposal, enabling the administrator to use his casting vote to approve the RFC plan.


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