No risks for RJB's bankers

RJB Mining's ability to pay its bankers back in ever quicker bites confirms what many thought at the time of the company's near pounds 1bn bid for most of the English coalfields. Whatever the risks in backing Richard Budge, the company's chief executive, they did not rest with his bankers.

Lending to RJB Mining was secured on the contracts the company inherited from British Coal, most significantly with National Power and PowerGen. These last until March 1998, by which time the banks, which want 90 per cent of loans paid off by then, may at current repayment rates have had all their money back.

Certainly, RJB's repayment schedule appears to be going as well as could have been expected. In the first half of the year, according to yesterday's statement, RJB had paid off bank acquisition debt of pounds 167m, leaving bank debt outstanding at pounds 153m.

That said, the position for shareholders is still as uncertain as ever. The company owes the Government pounds 117m in deferred consideration and the prospects for 1998 and beyond, after the generator contracts, look a good deal riskier. Coal Investment's recent contract to supply 2.8 million tonnes to National Power at "internationally competitive" prices suggests there may be growing pressure on pricing, and it is anybody's guess what might happen to volumes.

Either way, paying back the bank debt early is not what counts. The company must win a few contracts for the future at the sort of prices it envisaged in its prospectus earlier this year if it is to prove it did not pay too high a price for the coalfields. Buyers of the shares, which have risen from 325p to 397p, have forgotten that pleasing the bankers is not always good for shareholders.