An appeal against a restructure of Solid Energy's debts has been dismissed, clearing the way for lenders to face a "haircut" on borrowings.
The Government said in February that the debts of state-owned Solid Energy had blown out to nearly $400 million, and that the company was in talks with its lenders to reduce the level.
In September it said that banks had agreed to a deal which would see them convert $75m in loans into a form of equity which could prove worthless, in return for the Crown injecting cash and loans into the company. The Government had threatened to place the company in receivership if the offer was refused.
The Japan-based Bank of Tokyo-Mitsubishi filed papers in the High Court in Auckland in a bid to renegotiate the deal, which was approved by the rest of the lenders that month.
In November, Jim Farmer, QC, acting for the bank, told the High Court that the move would effectively result in a haircut for banks as the shares "have little or no value".
Lawyers for the Crown said in court that the Bank of Tokyo-Mitsubishi had warned the Government it faced negative publicity as a result of the deal.
Yesterday, Solid Energy confirmed that the High Court had dismissed the appeal. It welcomed the decision. "It gives us more certainty as we work to return the company to profitability," a spokeswoman said.
The debt restructure had already been approved by a majority of Solid Energy's lenders, with the appeal aiming to reverse the deal.
The Bank of Tokyo-Mitsubishi's Auckland office said it had no comment.
It was not known if it would appeal.
Finance Minister Bill English declined to comment, with a spokesman saying it was a matter between Solid Energy and the bank.
Previously, he had warned that the alternative to the offer on the table would be receivership, placing 1000 jobs at risk.
"If they were successful in court, of stopping a deal, then Solid Energy would probably go into liquidation and they would lose all of their $80m," he said.
"So success is probably worse for them, than failure in the courts."
The deal will see the Crown inject $25m in cash, as well as extending the company loans worth $130m.
Those loans would rank ahead of all others, and are backed by Solid Energy's key assets, including farms in Southland, which former chief executive Don Elder once hoped would be the source of fuel for a massive lignite industry.
The plans were later abandoned.
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