Finance Minister Bill English believes the proposal to restructure Solid Energy is a done deal, dismissing concerns that one of the banks is not on board.
On Tuesday the Government revealed it was pumping $25 million cash and extending up to $130m in loans to the troubled mining company.
In return, the banks are being asked to convert $75m - about of fifth of what they are owed - to a type of shares which may never be worth anything.
While the four main New Zealand banks and TSB are believed to be prepared to accept the deal, sources say thatBank of Tokyo-Mitsubishi is holding out, with reports it had threatened legal action.
English said yesterday the Government believed it had reached a deal, with the banks appearing to appreciate that the Crown was prepared to allow Solid Energy to fail if it had to.
"As far as we're concerned we've got a deal. We're past the stage of saying whether we're going to liquidate or negotiate."
While acknowledging that a creditor may have the option of trying to place Solid Energy into receivership, this would be counter-productive, as it would risk all of the money it was owed.
"A bank that's not worried about losing all its money could have the option of pulling the whole thing down.
"They've got pretty powerful incentive not to do that because they want to get some of their money back."
Banks had tended to believe that there was an implicit government guarantee from lending to state-owned enterprises "and that's actually not the case".
While the Government was lending the company a large amount, in return it got security over all of Solid Energy's assets, putting it at the front of the queue for repayment if the company went bust.
- © Fairfax NZ News