Victoria has been thrown a lifeline in its waste crisis after Cleanaway purchased $60m of the debts of collapsed recycling firm SKM, giving it effective control of the company.
The ASX-listed waste management giant bought out the Commonwealth Bank’s position as major lender to the controversial SKM, which went belly-up this month with an estimated $100m in debt after Asian waste import bans crippled its business model and fires at its recycling stockpiles caused a state government crackdown on accepting new rubbish.
The collapse threw Victoria’s waste management system into disarray, as SKM handled about 60 per cent of the state’s garbage, and it was feared that around 180,000 tonnes of waste could go straight to landfill.
Cleanaway has appointed Mark Korda and Bryan Webster of KordaMentha as receivers. According to Korda, they – with Cleanaway’s support – will get to work seeing what can be done for the stricken SKM.
“We will be aiming to get the business back to capacity to help ease Victoria's waste crisis. This must be done within our statutory obligations to get the best value from the business while repaying the secured creditor.
“We will also begin working immediately with the Victorian Government and regulators to prepare for a path forward,” he said.
KordaMentha will now assess the SKM business, including the backlog of recyclables at each site; put together a rescue and restructure package; and implement a plan which may include the sale of the business.
As its secured creditor, Cleanaway is in pole position to buy most of SKM if it goes up for sale, and Vik Bansal, managing director of Cleanaway, has expressed interest in doing so.
“The acquisition of the debt will allow us to work with the receivers to examine viable options for SKM. If a sale process is undertaken, and if we are successful in purchasing any assets, we will return the assets to a sustainable footing.
“It will also present us with an opportunity to add to our network of prized infrastructure assets as part of our Footprint 2025 strategy,” said Bansal.
The debt buyout does not include SKM’s glass recycling business, which owes around $5m to Westpac by itself.