Nyrstar says it has not breached any agreements by delaying a $37 million loan repayment.
The company took this stance in a statement released on Thursday after Treasurer Rob Lucas said the company’s handling of the matter was “surprising", considering a state government $291 million loan guarantee was at stake.
It is believed Nyrstar Port Pirie smelter is quite capable of paying the amount, but has been over-ruled by the Board of Directors overseas.
The company said it fully complies with its contractual obligations relating to the financing arrangements.
It referred to the timing of the payment of the Perpetual Securities for the smelter’s $660 million redevelopment In line with the funding agreement with the government.
“The company has full discretion to defer payment of the Perpetual Securities. The Perpetual Securities are directly linked to the progress of the project and are structured as equity-like funding,” the statement said.
‘”As previously communicated, the project construction was delayed by 18 months and was subject to significant cost over-runs that were funded entirely by the company.
“The delay in the start of the ramp-up is impacting the realisation of cashflows from the project relating to the timeline contemplated at the time the financing arrangements were finalised in 2014.
“The company has elected to defer payment of the Perpetual Securities. Nyrstar has not breached any agreements by delaying the payment and is in full compliance with its contractual obligations relating to the financing arrangements.
“As communicated in the first-quarter 2018 Interim Management Statement, the company is making pleasing progress with the project ramp-up with operating time, tonnes of feed to the TSL furnace and tonnes of slag product all at new monthly highs for April 2018.
“There is no change in the expected earnings uplift as guided by management in the latest quarterly results presentation.
“The Port Pirie operation directly employs more than 700 people and Nyrstar has invested about $660 million in the project since 2014.
“This will ensure the long-term sustainability of the operation for the people of South Australia.”
It said the Perpetual Securities, an equity accounted instrument, was one part of the funding package for the project.
Nyrstar Port Pirie issued the Perpetual Securities for $291 million to a special purpose vehicle which then raised funds from third-party financiers benefiting from a guarantee from EFIC, Australia’s export credit agency, supported by a back-to-back indemnity from the then Weatherill Labor government.
The terms of the Perpetual Securities resemble those for equity securities, for example, discretionary amortisation, but include various covenants and undertakings, including a prohibition on dividends from Nyrstar Port Pirie or its subsidiaries while the Perpetual Securities are outstanding.
The coupon on the Perpetual Securities is variable and linked to the six-month bank bill swap rate.
The company has a robust balance sheet with substantial liquidity.
At the end of the first quarter, it had a cash balance of $312 million with liquidity of $752 million.
Nyrstar is incorporated in Belgium and has its head office in Switzerland.
Port Pirie-based Independent Frome MP Geoff Brock, who brokered the loan guarantee with the then minority Labor government in 2014, says he expects the situation regarding the deferred payment to resolve itself with the support of the Premier and Treasurer.