Coal news and updates

Negotiations over Wiggins Island Coal Export Terminal continue to heat up, according to sources, with Glencore’s plans to sell assets linked to the complex said to be creating tension.

 

The global trading house recently placed its Rolleston coalmine up for sale. The expectation is the sale of other adjoining assets is still to come.

 

Glencore ships coal from the Rolleston mine through WICET and the understanding is the assets are owned by the same subsidiary that is liable to pay down the debt in the Queensland-based terminal.

 

The fear among some is that more divestments could mean the interests of the Swiss-based powerhouse linked to the asset will not have the financial strength to pick up the slack of other collapsed miners that owe money to WICET and can’t pay.

 

Under WICET’s terms, a consortium of miners that ship coal own the terminal and pay down the $4bn-plus debt on the asset via take or pay contracts.

 

The contracts mean the miners that use the terminal pay to export coal regardless of the actual throughput, and should other miners collapse, the stronger players have to meet their costs. The problem for Glencore is that it is the largest of the miners exporting from the terminal and will most likely be left footing the bill given it has the deepest pockets.

 

In recent months, Glencore has been negotiating with WICET’s lenders to change the terms of the contract so that it does not need to pay the shipping costs of other parties. The big question centres on whether the Glencore parent company would be liable for the WICET debt should the Australian subsidiary be unable to pay and whether its asset sales can also proceed from a legal perspective.

 

It comes as pressure starts to mount on WICET and a refinancing deal at least a year out from its refinancing deadline on September 18 next year.

 

Should a refinancing deal not be reached by the end of the month, finalising the WICET accounts will remain a challenge.

 

Those in the insolvency industry will no doubt be eager to see if McGrath Nicol lands the role of receiver for WICET should the asset collapse.

 

McGrath Nicol is advising the banks, while Fort Street Advisers is working with WICET’s shippers, and the theory around the market is that another insolvency firm could be handed the mandate if it is unable to be rescued.

 

Onlookers are betting the senior debt holders will have their $US3bn ($3.8bn) investment preserved, while the holders of $US375m of junior debt and $US400m of preference equity would take a haircut so the asset remains afloat.

 

Glencore is not thought to be a holder of secured debt.

 

Source: The Australian