EXCLUSIVE by EWAN LAMB
The mountain of debt which finally engulfed Scottish Borders Council's waste management contractors New Earth Solutions last year may have been as high as £116 million, it has been revealed.
And non-preferential creditors who previously thought they might recoup between four and eight pence in the pound will get just 1.5 pence in the pound while claims from unsecured parties have rocketed fourfold from £9.1 million to a staggering £36.289 million.
The latest financial statistics in the New Earth Solutions Group disaster are disclosed in a progress report to creditors by joint administrators Sarah Bell and Philip Duffy, of insolvency specialists Duff & Phelps.
Yet again it must be emphasised that members of Scottish Borders Council either failed to check on or were completely unaware of the company's fragile monetary state throughout the lifetime of a four year contract.
The fact that the local authority even considered doing business with such a debt-ridden Group simply beggars belief. The council decision to hook up with NESG cost local taxpayers at least £2.4 million, and the urgently needed waste treatment facility at the heart of the deal was never even started.
Documents seen by Not Just Sheep & Rugby show that NESG was heavily in debt to banks in 2011 when SBC sanctioned its original multi-million pound deal, but was also in hock to its associated off-shore fund New Earth Recycling & Renewables [Infrastructure] plc or NERR prior to a contract deed of variation being signed by councillors in October 2012.
The Duff & Phelps report shows there is insufficient funds from sales of assets to pay off the secured creditor (Co-op Bank) in full. The Co-op was owed £41.8 million.
Next in the pecking order of so-called secured creditors came NERR, the now bankrupt Isle of Man investment fund chosen by SBC to bankroll the £21 million waste plant at Easter Langlee, Galashiels.
According to the report: "NESG was historically funded via quasi-equity from NERR. [The fund] provided the Group with funding for ongoing trade as well as capital improvements. The funds were provided under a debenture created on September 19th 2011.
"As at the appointment (of administrators) the indebtedness to NERR totalled in excess of £39 million. As NERR's security is subordinated to the Co-op's debt there is no prospect of any distribution being made to NERR under its security".
Hundreds of investors and shareholders in NERR who lost everything now know their money went to prop up the struggling NES Group even though they had been told the fund invested in new waste recycling facilities in the UK.
So did the millions of pounds which NERR handed over to NESG in September 2011 mean the "green" fund could no longer finance the Scottish Borders project?
Within three months of the debenture being finalised New Earth informed SBC that a conventional facility to treat the region's rubbish could no longer secure bank funding. Surely the paying public have a right to know the full facts relating to the disastrous contract failure.
Duff & Phelps had expected to conclude the administration of NESG this month with a move to dissolve the business and remove its name from the Register of Companies.
But the report explains that a request has been made to extend the administration by twelve months to June 2018.
"The extension is necessary following the requirement of the joint administrators to include a provision for a significant non-preferential claim", says the report. "The claim is currently the largest submitted within the administration.
"However, it has not yet been possible to conclude the position in respect of this claim and therefore the extension will be required to conclude the adjudication of this claim".
There is no indication in the report as to the identity of the claimant or the amount being sought. A further progress report is likely to be issued in the near future.
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