Key Takeaways:
- The chair of TT-Line, Ken Kanofski, disputes the auditor-general’s opinion that the company is insolvent, citing that it would be "perverse" for the government to allow it to go under.
- The auditor-general, Martin Thompson, formed the view that TT-Line was insolvent in July due to its inability to pay debts over the long term.
- TT-Line has received a $75 million equity injection and is negotiating to extend its debt repayment date to 2028.
- The company is expected to start operating its new ferries in October and will attempt to sell its existing ferries, Spirit of Tasmania I and II.
- TT-Line’s solvency is a complex issue, with the company arguing that it has addressed its short-term and medium-term issues, but still needs to address its long-term financial viability.
Introduction to the Controversy
The chair of TT-Line, Ken Kanofski, has disputed the auditor-general’s opinion that the company is insolvent, saying that it would be "perverse" for the government to allow it to go under. This statement was made during a parliamentary scrutiny hearing, where Kanofski responded to questions about the state-owned company’s solvency. The auditor-general, Martin Thompson, had formed the view that TT-Line was insolvent in July due to its inability to pay debts over the long term, and had informed the Australian Securities and Investments Commission (ASIC) on July 31.
The Auditor-General’s Opinion
The auditor-general’s opinion on TT-Line’s insolvency was based on the company’s inability to pay its debts over the long term. However, Kanofski argued that determining solvency on long-term debt repayment capacity, rather than short-term, was incorrect. He stated that if this was the yardstick used, then any company looking to refinance its debt or raise equity in the future would be considered insolvent. Kanofski also pointed out that TT-Line’s debt capacity had been increased from $990 million to $1.4 billion in July, and that the company was negotiating to extend its debt repayment date to 2028.
TT-Line’s Response
TT-Line has responded to the auditor-general’s opinion by seeking independent advice, which it received verbally on July 25 and in writing on August 2. The company’s lawyers have written to the auditor-general, stating that his assessment of TT-Line’s solvency is "misconceived" and that his commentary is causing harm to the company and its stakeholders. Kanofski also pointed out that TT-Line effectively owes its debts to the Tasmanian treasurer, who would not allow it to go under. He stated that if the debt guarantee is exercised by Tascorp, the treasurer pays the money to Tascorp, and TT-Line then owes the money to the treasurer, who has broad discretion as to how to deal with that debt.
The Impact on the Company
The controversy surrounding TT-Line’s solvency has had a significant impact on the company. The auditor-general’s opinion has caused concern among stakeholders, including employees, suppliers, and customers. Kanofski has stated that the company is working to address its short-term and medium-term issues, and will attempt to address its long-term financial viability issues in its options for government in January. The company has also received a $75 million equity injection and is expected to start operating its new ferries in October. The existing ferries, Spirit of Tasmania I and II, will be sold, with a broker already appointed.
The Future of TT-Line
The future of TT-Line is uncertain, with the company still facing significant financial challenges. However, Kanofski is confident that the company can overcome these challenges and become financially viable. He has stated that the company will attempt to sell its existing ferries, Spirit of Tasmania I and II, and that there is a strong likelihood that they will be sold into the northern hemisphere market. The company’s new ferries are expected to start operating in October, and TT-Line will attempt to address its long-term financial viability issues in its options for government in January. Further government equity has not been ruled out, and the company will continue to work with the government to ensure its financial stability.
Conclusion
In conclusion, the controversy surrounding TT-Line’s solvency is a complex issue, with the company arguing that it has addressed its short-term and medium-term issues, but still needs to address its long-term financial viability. The auditor-general’s opinion has caused concern among stakeholders, but Kanofski is confident that the company can overcome its financial challenges and become financially viable. The company’s future is uncertain, but it is expected to start operating its new ferries in October and will attempt to sell its existing ferries. The government will continue to work with the company to ensure its financial stability, and further government equity has not been ruled out.