Bank debt deal adds to pressure on coal miner

By PERRY GOURLEY
Published on 19/11/2012 20:32

INVESTORS and employees at troubled coal miner ATH Resources have been warned that a major restructuring of the business is needed after a turnaround specialist yesterday bought some of its bank debt.

ATH, which employs about 330 staff at its five Scottish open cast mines and is one of the UK’s largest miners, said that a fund controlled by turnaround specialist Better Capital had acquired part of the banking facilities held by HSBC and Clydesdale Bank.

The board has been told that a “comprehensive review and restructuring” of the group’s business will now be required.

Given the existing level of liabilities in the company, which operates mines in Ayrshire, Dumfries and Galloway and Fife, it is likely existing shareholders will see the value of their stakes wipes out.

ATH added that following completion of the review the Better Capital fund may be prepared to inject new capital into a restructured business.

Better Capital, founded by high-profile venture capitalist Jon Moulton, said its fund had committed £15 million to the special purpose vehicle used to acquire ATH’s banking facilities.

ATH’s market value has plunged in recent years, from a high of more than £110m in 2007 to just £170,000 at close of trading yesterday.

Last month, the Doncaster-headquartered firm’s future was thrown into doubt after it called in Deloitte to look at options including restructuring or a sale of the business.

The company, which has blamed a slump in coal prices for its difficulties, warned then that the level of its debts meant shareholders were likely to see the value of their stakes wiped out in any rescue move for the firm.

The news came just two weeks after ATH announced that it was in discussions with its key backers to secure support for a proposed refinancing plan.

Major shareholders in the company include Swedish value investor Peter Gyllenhammar. He is the largest investor in the company, with a 20 per cent stake, while businessman

William Paterson of Coatbridge-based group Patersons Quarries is also a major shareholder, with a stake of 8.52 per cent.

Last year, the company

entered takeover talks with an unnamed buyer that were eventually aborted. Energy and logistics group Hargreaves Services had been tipped as a likely suitor, although Scottish Resources Group, Scotland’s biggest open cast coal miner, was not understood to be interested.

Coal production of 1.6 million tonnes for the financial year to the end of September helped ATH cut its debts from £31m to £22m, but the company had warned it needed further improvements to fund the business beyond December.

The firm had also recently written off £2m due to issues at its Muir Dean site in Fife, where problems caused by old mine workings had reduced coal production and increased costs. It has also mothballed its Glenmuckloch site in Dumfries and Galloway after postponing a decision on whether to extend the operation.

Last month, the group highlighted the impact of a slump in international coal prices which were some 30 per cent below that of the beginning of the financial year.

Shares in ATH closed down 48.5 per cent, or 0.4p, at 0.42p last night.