New Earth Solutions enters administration
The decision was announced yesterday (7 June) in a letter to shareholders of the New Earth Premier Fund, written by fund director Michael J. Richardson.
New Earth currently manages around 450,000 tonnes of waste a year at its two operational in-vessel composting (IVC) facilities in Sharpness in Gloucestershire and Blaise in Kent, as well as three mechanical biological treatment (MBT) facilities at Avonmouth in Bristol, Cotesbach in Leicestershire and Canford in Dorset. All of these treat waste from both local authority and commercial customers.
The ‘extensive discussions’ over how to best restructure the operations of the New Earth Solutions Group (as well as New Earth Solutions Facilities Management Limited and the subsidiaries of the two) with the unnamed developer and the group’s senior lenders, Norddeutsche Landesbank Girozentrale and the Cooperative Bank plc, first began in October 2014, with initial proposals made in Spring 2015.
However, Richardson says that there was ‘no material progress’ made towards reaching an agreement with the senior lenders during discussions last year, with the management concerned about the risks of local authority clients, suppliers of municipal solid and organic waste, and the companies purchasing the refuse-derived fuel (RDF) processed by New Earth cancelling their contracts or demanding different payment terms.
Further proposals were put forward by the unnamed developer in the early months of 2016, offering to provide a €50-million (£39-million) equity injection to restructure its balance sheets. However, this was rejected by the senior lenders.
An agreement was finally reached, with the developer purchasing the senior debt from the senior lenders, subject to certain conditions being met by the end of May. However, after accounts for the year ending 31 January 2015 were filed, the company was approached by customers threatening to stop taking off-takes if bank guarantees were not given.
The letter explains that senior lenders were not prepared to meet these demands, accelerate payment requests by the RDF customers, or accept the developer’s previous offers of assistance – forcing the New Earth directors to file for administration.
Richardson wrote in the letter: ‘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.’