Aorangi accuses Govt of breaking pledge

Press, 26 May 1984, Page 1

Aorangi accuses Govt of breaking pledge

By

MICHAEL HANNAH,

in Wellington The Government has been accused of dishonouring a pledge to Aorangi Forest Industries, Ltd, to keep the company in production while a commercial solution was found to its capital shortage. Correspondence was released yesterday by the member of Parliament for West Coast, Mr T. K. Burke, in which the managing director of Aorangi, Mr D. B. H. Stanley-Jackson, told the Deputy Prime Minister, Mr McLay, the “Government has dishonoured its pledge.” According to the correspondence, Aorangi alleged that the Government promised to maintain the company's production, as well as'pay its wages. On this basis the company had agreed to a condition on Development Finance Corporation assistance, that it give “bona fide commercial

interests” reasonable access to commercial information about Aorangi. Those “interests” included a competitor, Nelson Pine Forest, Ltd, which also held 25 per cent of Aorangi’s shareholding. According to Aorangi’s solicitor, Bell Gully and Company, Government officials had confirmed that “minimal financial support,” offered to Aorangi while a commercial solution was explored, meant keeping its production going. “The company’s decision to accept Government’s proposals was based on this definition,” Mr A. D. Ford, of Bell Gully, told the Minister of Regional Development, Mr Birch. In reply, Mr McLay said, however: “It was envisaged that sufficient assistance would be provided to enable the workforce to be retained and the company to continue in existence whilst commercial options were explored.

“What is envisaged to that end is such an advance to the company as will cover the wage bill for the next two weeks,” Mr McLay said. Releasing the correspondence yesterday with Mr Stanley-Jackson’s approval, Mr Burke said the company had committed itself to an agreement which required it, at Mr Birch’s request, to make available information to competitors, in return for assistance to keep production going. “Once that information had been made available, however, it seems clear that the Government changed its interpretation of the meaning of assistance,” Mr Burke said. “The company, therefore, had exposed its innermost secrets to its competitors and was now being offered only sufficient to pay the staff, while perhaps a competitor put together a proposition to take the com-

pany over,” he said. The correspondence also relates Aorangi’s concern over an interest expressed by an Auckland competitor, Henderson and Pollard. Mr Ford told Mr Birch on May 11 that he would be surprised if the Government insisted that Aorangi should negotiate with Henderson and Pollard as a prerequisite to any offer of Government assistance.

Mr Birch, replying on May 17, emphasised that the Government’s objective was to maintain employment on the West Coast. It did not have a responsibility to protect shareholders’ or creditors’ interests, he said. “It was for this reason that I asked that A.F.I. give full and reasonable consideration to all proposals put to it by other commercial interests,” Mr Birch said. This meant giving reasonable access to information necessary for outside parties to assemble and de-

velop a proposal for commercial involvement in the Gladstone operation. “I am not satisfied this has been the case to date.” “However, in view of the importance the Government places on employment in the area, it is prepared to consider requesting the D.F.C. to give favourable consideration to a request from A.F.I. for minimal financial support while these commercial options are explored.” Mr Birch did not define what was meant by “minimal financial support.” But the Aorangi board agreed the next day, May 18, to accept his proposals and undertook to provide reasonable access to information and to give fair and reasonable consideration to proposals which might maintain employment on the West Coast.

Three days later, on May 21, Nelson Pine Forest formally sought commercial

information on Aorangi prepared by its accountants, Arthur Young and Company. Nelson Pine Forests’ request was supported by Mr Birch the same day. Mr Birch said the Government’s interest was solely to find a solution which protected employment on the West Coast. “It has not, and does not, favour one commercial party over another,” he said, asking that Aorangi comply with Nelson Pine Forests’ request. The information was duly handed over. Mr Ford, of Bell Gully, noted at the same time that Aorangi had not received any request from Henderson and Pollard of Auckland, but it had had discussions with “another large New Zealand company which has expressed interest in the position.” Aorangi had requested minimal financial support from the D.F.C., and Mr Ford expressed surprise

that the request was taking so long to process. Mr Ford had been told that the amount sought was “the bare minimum required to maintain the operation and keep production going.” An urgent response was essential. he said. At this stage, May 22, Mr Ford again wrote to Mr Birch expressing concern that the Prime Minister’s Department had said there appeared to be a misunderstanding as to the meaning of the term “minimal financial support.” According to the Prime Minister's Department, the D.F.C., Government officials and others said that by the expression, they only meant paying the wages so, as to prevent the company's workforce from being disbanded. Mr Ford said the term had been thoroughly checked before Aorangi agreed to the D.F.C.'s conditions that it allow access to

its commercial information. It had been confirmed by Mr Birch's private secretary and by the D.F.C. that the term covered keeping the plant in production. He said there could be no misunderstanding of what was meant by the term “minimal financial support.” In reply, Mr McLay said it had been clear that there was no commitment by the Government to continued suport of Aorangi. That remained the position, and he maintained that the Government had committed itself to meeting onlv the wages bill. Mr Stanley-Jackson concluded: “I and my board must regretfully conclude that Government has dishonoured its pledge." Aorangi therefore withdrew from any further negotiations with the Government or the D.F.C. and turned down the D.F.C.’s offer of $30,000. Further reports, page 2