Central Government is offering extensive financial support to the likely buyers of the two Ruapehu ski fields, according to a leaked memo to MBIE’s regional development head.
The fields will be broken up and sold for a token price of a dollar each to Whakapapa Holdings and Pure Turoa, if the Government’s preferred outcome in the Ruapehu Alpine Lifts administration is approved next week.
That deal, labelled a “prepackaged liquidation”, will see the Crown take a 25 percent shareholding in both Whakapapa Holdings and Pure Turoa, which will then own their namesake fields.
An email memo sent on Tuesday by Chapman Tripp partner Michael Harper to Robert Pigou, the head of MBIE’s regional and economic development arm Kānoa, revealed the companies would obtain the working capital required to fund the ski fields and operations from shareholder equity, including from the Crown’s stake.
The buyers would also take on additional local investors and a further loan from the Government.
Other terms of the deal include the ski field assets being delivered in a safe and serviceable condition for 2023 operating.
To enable this, the buyers require Kānoa to commit to performing and funding scheduled maintenance until the deal is completed.
The total cost of deferred maintenance on the fields is said to be around $25m.
At this stage Newsroom doesn’t know how much more the Government is required to invest, but future expenses for Pure Turoa and Whakapapa Holdings include splitting half of the $44 million owed to unsecured creditors and half of the administrators and liquidators’ costs and expenses.
In Whakapapa’s case, the bidder would also assume liability for the $15m in bonds issued to fund the Sky Waka gondola.
MBIE will wipe its $15m in debt if its proposal gets the thumbs up.
The Whakapapa Holdings/ Pure Turoa deal being voted on by creditors isn’t a foregone conclusion, with two other options on the table.
In order to pass, any resolution at the creditors’ meeting must be approved by 50 percent of creditors attending and voting by number; and 75 percent of creditors attending and voting by value of debts.
About 14,000 life passes have been sold over the years, valued at about $30 million in the administration documents. So even without mass voting turnouts, pass holders have considerable voting power in terms of creditor numbers.
The Ruapehu Skifield Stakeholders Association (RSSA), representing a group of life pass holders, has its own proposal for approval at the watershed meeting. That would see the current company continue to own both fields.
While they have numbers, the stakeholders debt value is dwarfed by the bloc formed by MBIE, the Department of Conservation and ANZ, collectively owed well over $100m.
The bulk of this is a contingent liability owed to DoC, expected to be as high as $100m.
In the memo, Harper said RSSA’s proposal, which relies on refinancing from pass holders, crowdfunding and new debt to pay off obligations and keep the field running, wouldn’t be able to meet the voting threshold.
He said there was a potential situation where the government’s preferred “prepackaged liquidation” option would also fail if not life pass holders voted in favour of it.
In the administrator’s report on the upcoming vote, sent out to creditors this week, this situation was pitched as something of a nuclear option.
“This scenario is unsatisfactory, and a worst-case scenario because the company is hopelessly insolvent,” the report read.
The administrators said there was potential for the transaction to proceed in this position, but there was substantial risk for both the company and the ski season.
The directors of the company have filed for a liquidation hearing in the Auckland High Court on the day after the watershed meeting, in case it is necessary.
Harper’s memo was as damning as the administrators’ in terms of outcomes for creditors and the ski season, but provided more insight on what would come next.
“If the High Court hearing is required, then the directors have requested that John Fisk and Richard Nacey are appointed liquidators. Once appointed as liquidators, they will sign and close the Ruapehu Transactions.”
PWC insolvency experts Fisk and Nacey are the current administrators of RAL.
The RSSA and Ruapehu hapū have both called for the sales process to be put on ice, saying it’s being rushed, that consultation has been inadequate, and the process needs more transparency.