PaperlinX gets time to dispose of Euro assets

Paper merchant PaperlinX has asked the Australian Stock Exchange (ASX) to extend its voluntary trading suspension as the company assesses the collapse of its UK business.

PaperlinX said it was still evaluating how the placement of its UK companies into voluntary administration would impact its other European operations, given the interconnectedness of financing arrangements and the supply chain in the region. It has asked the ASX to extend the voluntary suspension of its securities until the commencement of trading on 16 April 2015 – unless there’s a further  update from the company before then.

PaperlinX is considering the potential sale of its Benelux operations but said it does not expect to receive any direct material benefit from the sale of Benelux or any other European business:

The company and its advisors are meeting with the UK administrators to progress this assessment and also to explore the potential sale of the PaperlinX Benelux operations prior to 15 April 2015 (the date on which the waiver granted by ING, a local receivables financier of the company’s Dutch (Benelux) operations, currently expires), and to continue discussions with ING.  The company is not currently expected to receive any direct material benefit from a sale or realisation of Benelux or any other European business.  However, the proceeds of a sale or realisation are expected to benefit other European stakeholders.

Andy Preece, PaperlinX chief executive, is confident that the remaining Australian and Asian businesses will be protected as British creditors seek to recover funds.  The Australian and NZ division, which operate under the Spicer’s Paper banner, are 'absolutely’ profitable, he said.

“There is a high degree of financial separation between the Australian and NZ entities and the UK and European entities.  The businesses are well managed and highly profitable with sufficient liquidity and certainly no problem with covenants.

“The issue was an irrecoverable cash decline which left the local directors unable to maintain their creditor obligations,’’ Preece told The Weekend Australian.  He said administrator Deloitte was working ‘exclusively for the creditors to maximise returns’ but the banks had no recourse on the company’s assets elsewhere.  Preece said the company would ‘fully disclose’ the British debt position when the Deloitte process was finalised.

Joint administrators Matt Smith and Neville Kahn, of Deloitte UK, announced on 1 April that 14 out of the company’s 19 British sites would be closed, with the loss of almost 700 jobs.  The move followed a decision by Dutch bank ING to withdraw credit insurance for the UK operation.  ING says it will continue supporting PaperlinX’s Dutch facility until April 15 in the hope that the business can be sold.

The European business, a long-time drag on the company’s otherwise relatively buoyant Asia Pacific operations, reported a loss of A$20.7m (Euro154.9m) for the six months to the end of December.