PEOPLE close to the action expect the United States bondholders to bail out Griffin Coal, at least in the short term.
A contractor to the company suggested the bondholders had two possible courses of action:
1) forcing a fire sale; or
2) convincing the administrator to allow them to pump in some money and put the mine back on a proper business footing so they can recover some of the money they appear to have lost.
The Griffin mines are, or should be, a profitable venture. But for years they had been starved of sufficient capital investment while propping up other Ric Stowe-controlled enterprises.
Most bondholders wanted to let management run the mines properly and allow them to reach their true potential so they could get their money back.
The contractor predicted the administrator, Brian McMaster of Korda-Mentha, would probably lean that way provided the bondholders were not too greedy in the return they demanded for the extra cash injection.
His suggestion was reinforced by an Australian Financial Review report on Saturday.
Without quoting sources, it said the outcome of Griffin Coal’s administration was likely to be determined by the US bondholders, who are the largest group of creditors,
US bondholders are owed $US475 million, in addition to $38m ($US35m) in interest, on 10-year US bonds issued through Merrill Lynch in November 2006 and February 2007.
Hedge funds acquired Griffin bonds at 34 per cent of their face value, or less, early last year, the report noted. Harbinger, the US hedge fund, may even have paid as little as 25 cents on the dollar, or less, for the bonds.
Last October the bonds were trading at 81 cents on the dollar and hedge funds that bought at 34 looked set to earn a windfall.
However, bondholders may now earn only 45 cents on the dollar — still positive for those who bought in at 34.
The situation has created tension between hedge funds, which want a quick outcome through the sale of Griffin assets, and institutional investors,who would prefer to take it slowly, the unsourced report said.
Some people, who have closely watched Griffin chief Ric Stowe’s business activities, are asking if he engineered the collapse of Griffin Coal and associated companies.
If so, he cannot have enjoyed the start this week of the sale of his Perth property portfolio.
The polo ponies are also for sale.
At least six helicopters were reportedly repossessed last week and trucks were taken from the mine sites as a string of senior staff and directors departed.
Griffin’s fuel supplier has also started charging the company 15 cents a litre more for fuel, the contractor said. “They need big money soon or they will start losing very valuable mining equipment.”
Last week Griffin Group executive director Jason Stowe, Ric Stowe’s 38-year-old son, stepped down as a director of the group’s parent company Devereaux Hold-ings. He was one of three board members to stand down from Devereaux (the holding firm Ric Stowe used to control the Griffin Group’s many companies).
The others to go were John Townsend and Ric Stowe’s tax lawyer Donald Pearson, one of his closest business associates.
Mr Pearson, stepped down from the board of WR Carpenter Agriculture Holdings on the same day as he stood down from Devereaux Holdings.
Locally, Megan Woithe, Griffin Coal’s sponsorship and communications adviser, left on January 6, three days after the company went into administration. She was lucky enough to have another job to go to.
One contractor asked why Ric Stowe did not put a potential rescue plan to the bondholders until two days before the deadline to pay a $5 million tax instalment and $25 million interest payment to the US bondholders.
He also asked why Mr Stowe did not front the meeting of bondholders, which began in Sydney at 9am December 29, though the bondholders had overseas representation.
Instead Mr Stowe sent Robert Crossman, a principal with Donald Pearson in Corpac Partners. They were the investment advisers who set up his network of debt.
“Why did he not proceed with the rescue plan to get the tax man off his back?” the contractor asked.
Stowe selling WA homes
Ric Stowe has begun liquidating his Perth property portfolio, selling one home this week and putting his expansive mansion north of the city on the market for $70 million.
Agent William Porteous has been contracted to sell Mr Stowe's Bullsbrook estate, north of Perth, where he hosted polo matches..
Set on 2471 hectares, the sprawling property includes a helipad, polo fields, swimming pools and a guest house.
It comes after Mr Porteous this week sold a home owned by a trust company linked to Mr Stowe for $7.85 million. The Swanbourne, home was advertised for sale at the weekend.
Signs that Mr Stowe's business empire could be in trouble first appeared in October last year when he put a prime 16-hectare site in Margaret River region up for sale.
He wanted more than $20 million for the property, which is understood to still be on the market.
If Mr Porteous secures a $70 million sale he will swiftly eclipse the Australian house price record set last month by mining executive Chris Ellison, who paid $57.5 million for Angela Bennett's mansion in Perth's Mosman Park.
Mr Porteous originally marketed Ms Bennett's property for $70 million before the global financial crisis and thedownturn in Perth's property market.
Griffin Coal is likely to be sold in the coming months.
Australian Financial Review
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