The news was announced in a letter to New Earth Premier Fund shareholders yesterday (7 June), which also reveals the waste firm’s refuse-derived fuel (RDF) customers had requested ‘immediate settlement’ of outstanding payments following publication of the Group’s accounts in May (see letsrecycle.com story).
The announcement is likely to concern a number of local authorities that have contracts with New Earth, which operates five waste plants at Avonmouth near Bristol, Canford in Dorset, Sharpness in Gloucestershire, Cotesbach in Leicestershire and Blaise in Kent.
W E (Bill) Riddle, who founded the company over 10 years ago, is one of six directors confirmed to have resigned from the Group between 2014 and 2015.
Administration follows extensive discussions between New Earth and its senior lenders – Norddeutsche Landesbank Girozentrale and the Cooperative Bank – to restructure the waste business.
According to the letter from fund director Michael J Richardson, negotiations between New Earth and its senior lenders had been ongoing since autumn 2014, with the European CHP developer entering talks in spring last year.
Deadline
The New Earth companies deferred the filing deadline for financial statements as at 31 January 2015 from October 2015 to January 2016 due to the ‘financial condition’ of the business and the anticipation that it could secure a deal with the CHP developer.
The developer had initially proposed either a combined €50 million (£39 million) equity injection into the New Earth companies, or an offer to purchase the senior debt from senior lenders.
However, these offers were rejected by the senior lenders in late November 2015, when New Earth management highlighted that local authorities and other waste suppliers would likely cancel their contracts or demand different payment terms.
New Earth also raised concerns that its market for waste treatment offtakes such as RDF would also be at risk as its clients would seek to cancel collections or renegotiate prices.
Further alternative proposals by the CHP developer were put forward to lenders in March, which led to six weeks of ‘protracted’ negotiations for it to purchase the senior debt by 31 May – conditional on the developer’s lender successfully syndicating the facilities required “in connection with the trade”.
But on 19 May, New Earth published its annual accounts for the year ended 31 January 2015 – revealing that the company had made consolidated losses of more than £29 million over the 12 month period.
Following the announcement, the company’s customers demanded ‘immediate settlement of outstanding payments or bank guarantees’ – while threatening not to take any further offtakes.
The senior lenders are currently in discussions with their advisers concerning what further options they wish to pursue
Michael J Richardson, director
New Earth Premier Fund
The letter notes that the senior lenders indicated they were not prepared to cover these demands, accelerate payment requests by the RDF customers, or accept the CHP developer’s previous offers of assistance – forcing the New Earth directors to file for administration.
Shareholders
In his letter, Mr Richardson notes that it is ‘understandable’ that the New Earth Fund’s existing shareholders will have ‘concerns’ over the announcement.
Small private shareholders in the fund have been unable to redeem their money since it was ‘temporarily’ suspended in 2013 – with some complaining to the Financial Ombudsman Service that they had received poor investment advice (see letsrecycle.com story).
Mr Richardson wrote: “The senior lenders are currently in discussions with their advisers concerning what further options they wish to pursue as senior secured creditors of the New Earth Companies. Once their proposed course of action has become clearer, we will write to you again in respect of the implications for the Fund.”
Register for free to comment