Coal Investments, Britain's second largest coal mining company, yesterday gave up on hopes of raising pounds 20m or so from shareholders and announced that it had placed itself in administration following severe cash-flow problems.
The decision is a severe blow for Malcolm Edwards, the former British Coal director, who lost out in the battle to buy the newly privatised coal mines in England and Wales to Richard Budge of RJB Mining.
At the time of the British Coal privatisation in autumn 1994 coal industry analysts feared that Mr Budge's group had overpaid for the mining assets he bought from the Government. But in the event it has been Mr Edwards, who bought the more problematic mines, who has had the problems while Mr Budge has paid back the bulk of the pounds 500m or so he borrowed from bankers.
Coal Investments, whose debts had reached around pounds 30m, took over mining operations in Stoke-on-Trent, Coventry, Notts, Doncaster, South Yorks, and Cwmgwili, near Swansea from British Coal when the industry was privatised. It employs around 1,400 miners and office staff whose jobs are now clearly at risk.
A statement from the appointed administrator, Arthur Andersen, said severe cash-flow problems had been caused by greater than expected difficulties and costs while re-opening the mines.
One of the administrators, Murdoch McKillop, said: "We plan to carry on trading whilst we review all the options open to us. It is too early to say what strategy we will adopt but the administration procedure is very flexible and we are hopeful that we will be able to find a way forward."
The company said it borrowed pounds 30m from three banks last year and asked for more cash this year. Its shares, which once reached more than 120p, were suspended in December at 25p after a planning application for development of one of the company's coal faces was turned down.
After a series of profit warnings and a failure to meet City expectations on cost control, Mr Edwards' reputation took a nose-dive towards the end of last year. In the past few weeks the company's institutional shareholders had been stressing that they would not support a rescue rights issue without the appointment of a new chief executive.
However, attempts to appoint a successor to Mr Edwards have failed and with that in mind the company's bankers and shareholders appeared increasingly reluctant to support a refinancing under the current management.
The administrators are now hoping to sell the businesses the company owns as a going concern. Coal Investments has a 32.5 per cent stake in Mining Scotland which could be worth up to pounds 10m. Waverley Mining, which holds a 27 per cent shareholding in the same company, could be an interested purchaser, but at a knock-down price.Reuse content