Creditors of ailing state coal miner Solid Energy have been advised to accept a plan that would allow for a gradual sell-down of the company assets.
The advice came from independent analysts appointed by administrators KordaMentha.
It has gone out to 1500 creditors who will meet next week to vote on the recommendation.
This recommendation is that Solid Energy keeps on trading and sells down its assets over a two-and-a-half year time frame.
It will then disappear.
If the creditors do not accept the recommendation, the company will go into immediate liquidation.
Debt levels raised
In unveiling the recommendation, one of the company's two administrators, Brendon Gibson, said the financial outlook for creditors would be better under a gradual sell-off.
He said under a progressive sell-down, creditors should be able to get 35 to 40 cents in the dollar.
But under immediate liquidation, the benefit would be 15 to 20 cents in the dollar.
The difference stemmed from lower severance costs if the mines are kept on for the purposes of sale as going concerns rather than being closed immediately under the liquidation option.
Mr Gibson also put a new value on debt - $400 million - up from the $320 million in the company's 2014 annual report.
That excluded some liabilities for environmental restoration of closed mining areas but these would be met by the Crown.
He said about $20 million of the debt was owed to trade creditors.
To be accepted, the deal will need 50 percent support from creditors on a numerical basis and 75 percent on the basis of the value of their debts.
He said many of the banks had already indicated they would support the proposal.
The recommendation has been applauded by the acting chairman of Solid Energy, Andy Coupe.
End of the line for Solid Energy
The latest events mark the end of the line for Solid Energy, which is the latest incarnation of a century-and-a-half of coal mining and over 70 years of state ownership.
Ten years ago, Solid Energy was booming, producing millions of tonnes of high quality coal and exporting it to India, China, Japan and elsewhere.
The company was financially successful, earning $94 million after tax in 2007 and $68 million in 2010.
But it also launched some costly investments in that time.
These included biofuel farms, a coal-to-gas conversion scheme, wood pellets and large areas of farmland bought in Southland for future brown coal or lignite mining.
Then, during the global financial crisis, the price of coal collapsed on world markets to about a third of its previous level.
The company had borrowed from the banks to fund expansion during the good times, leaving a dangerous debt overhang which could not be funded from earnings when times got tough.
In 2013, Solid Energy went through the first of a series of September crises, when it found it could not pay its the interest on its debt.
In a deal two months later, the banks took a $75 million haircut, but won preference shares in return.
The Government also got preference shares in return for a $25 million grant and made $100 million available to the company as a loan.
A year later, the crisis returned.
This time, the government made $103 million available to Solid Energy in a complex arrangement which was actually an indemnity against the cost of restoring mined land to its previous condition.
This also ensured there was enough equity in the company to outweigh its debts.
But the latest trouble in September was a crisis too far. The government refused to put any more money into the company and the board of directors declined to sign off on the accounts, leaving Solid Energy with only one way to go: down and out.