Griffin Coal Mining Co, a failed Australian coal mining company with debts of at least A$700 million ($646 million), may be sold to a Chinese or Indian buyer, its administrator said.
“There’s been a number of expressions of interest so far from overseas and domestic companies,” Brian McMaster, a partner at administrator KordaMentha, said in an interview before a meeting of creditors in Perth today. Interest has been shown by “China, Indian participants in the energy sector broadly and the coal sector more specifically, and finance entities”.
Japan’s Mitsui & Co was among 21 entities selected at the meeting to advise KordaMentha on winning the maximum return for creditors. Rising demand for coal to fuel power stations and for use in steelmaking in the world’s two fastest-growing major economies is driving Chinese and Indian companies to seek acquisition targets in Australia.
“In the past they have shipped the odd cargo to India, so there may be interest from Indian companies seeking to expand or make that the focus of their business,” Andrew Harrington, an energy analyst at Patersons Securities Ltd in Sydney, said by telephone today. China may be interested “because they are interested in all things energy, but the rationale doesn’t seem quite as strong there”, he said.
China’s Yanzhou Coal Mining Co last month completed a A$3.5 billion acquisition of Brisbane-based Felix Resources Ltd. India’s Jindal Steel & Power and Meijin Energy Group of China have made rival takeover proposals for Australian coal explorer Rocklands Richfield Ltd.
Wesfarmers Ltd, a Perth-based retailer that owns chemicals businesses and the Premier Coal mine in Western Australia, has been cited by analysts, including Harrington, as the most likely bidder for Griffin Coal.
Unsecured creditors, including US bondholders, owed $475 million, may recover less than 40 cents on the dollar after the Australian company defaulted on an interest payment and appointed an administrator, Nomura Holdings Inc, last week. Investors in Western Australia’s oldest coal-mining company may receive from the “mid 30s” to “high 40s”, depending on the price its assets fetch, Nomura sales and trading desk analysts led by Pradeep Mohinani said.
“It’s far too early to tell what bondholders may get back,” McMaster, a partner at KordaMentha’s Perth office, said today. “We have to run through to the completion of the sale or restructuring program. At that stage, we’ll be in a position to assess who gets what level of return. A sale or restructuring plan would take a minimum of several months to identify really who are credible counterparties.”
The power-station coal producer’s US bonds traded at 58 cents in the dollar to yield 20 per cent on January 12, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Bonds are typically termed distressed when they yield at least 10 percentage points more than similar-maturity government notes.
Griffin Coal said December 11 that it would ask bondholders to agree to waive their rights to take enforcement action after it missed a bond payment due December 1, citing a “a temporary liquidity shortage”.
Griffin Coal is a unit of the Griffin Group, which was founded by businessman Rick Stowe and has investments in energy, property, agriculture, coal, office products and helicopters, according to its website.
No companies related to Stowe were chosen for the creditors committee after being voted down.
“Our investigations to date indicate the group is quite complex and there’s certainly company loans and other matters that need to be investigated,” McMaster said. The company has received debt claims for Griffin Coal totaling about A$1 billion, some of which may not be valid, he said.