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TSB Bank writes off $53.9 mln Solid Energy debt; Fitch affirms A- rating

28 Feb 2015

TSB Bank, the Taranaki community-owned bank, has written off the remaining $53.9 million debt exposure it had to stricken state-owned coal miner Solid Energy as the prospects of getting repaid deteriorate.

The lender was one of a group of lenders to Solid Energy who wrote off $75 million of the $369.7 million they were owed in exchange for preference shares when the coal miner was forced to go to its government shareholder for a bail-out when global coal prices slumped. The coal miner today said it would delay its first-half report as coal prices were more muted than expected, and could potentially pose problems for it when it would need to repay or refinance debt next year.

TSB held a senior bond exposure of $67.5 million at the end of 2013, and later wrote off the $13.8 million it held in preference shares. It has now written off the remainder of the loan given weak prospects for recovery, according to Fitch Ratings. The rating agency said the impairment won't affect TSB's A- credit rating as the lender doesn't have any other exposures of that kind, and on a pre-impairment basis will remain one of the country's most profitable banks.

This week, Solid Energy chair Pip Dunphy stepped down before her term expired in October, having taken over from Mark Ford who fell ill and later died in March of last year.

The Christchurch-based state-owned enterprise last year reported a loss of $181.9 million in the 12 months ended June 30, 2014, and the board didn't anticipate a return to profitability until the 2017 financial year. At the time of the annual report's release in October, the company's board forecast a gradual improvement in coal prices with a budget of NZ$153 per tonne in 2015.

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