Pike River in receivership

12-month NZO chart courtesy NZX.com. Click to zoom.

NZ Oil & Gas (NZX: NZO) has appointed receivers to Pike River Coal (NZX: PRC) only weeks after explosions ripped through its mine on November 19, killing 29 people.

The action was at Pike River’s request, NZO - a secured creditor - said.

Pike River, whose West Coast mine remains shut after the first explosion on November 19, is 24.9% owned by NZO.

John Fisk, Malcolm Hollis and David Bridgman of PricewaterhouseCoopers have been appointed receivers, NZO said.

Pike River said it needed to address corporate solvency ahead of the extension of time that its secured creditors had provided in the immediate days following the explosion.

The company has substantial debts which are in excess of its cash and other sources of funds.

“Given these circumstances, receivership provides the best mechanism to manage the business’ immediate future,” NZO chief executive David Salisbury said.

“It is anticipated that the receivers will give particular regard to preserving the value of the asset, while recognising that there is considerable uncertainty about the future of the mine,” he said.

Pike River’s chairman, John Dow, said the company was in a precarious position after the blasts.

“The only prudent action we could take was to approach our major creditors and advise them we were unlikely to be able to repay our loans at the end of the standstill period that NZOG and BNZ offered us after November 19,” he said.

NZO shares slide
NZO shares (NZX: NZO) , which were on a trading halt leading up to the news, immediately fell 3.37% to 86c. By 3.30pm the shares were down 1.1% at 88c.

Before the disaster struck, NZO shares were trading above $1.25.

Pike shares remain in a trading halt.

Cruel blow
EPMU, the union representing coal miners at the company, described the news as a "cruel blow."

“This is very concerning news because it is now in doubt whether the men working for Pike River Coal Ltd will get their one month of notice paid out, redundancy payments and any other entitlements such as holiday pay,” EPMU national secretary Andrew Little said.

“This is a cruel blow just a couple of weeks before the Christmas holiday,” he said.

“We will now work with the receivers to clarify the situation and the entitlements that remain owing to the workforce.”