Question

Restructuring Bulong's Project Debt

Answer 1

Preston Resources is a small Australian gold mining company who bought the Bulong nickel mine for A$319 million in November 1998 and financed the acquisition by issuing a US$185 million project bond.  During thy times, when mining had been underway for several months and construction of the processing plant was essentially complete.

Almost from the starting itself, a series of design and operating problems shut down the production process and resulted in costly repairs. Although processing performance improved by late 2000, maintenance issues remained to plague the plant, and output level remained considerably lower than the forecast levels. This case which was set in 2002, concerns the financial consequences of these problems, including a bond default in January 2000 and Preston's efforts for restructuring the project debt.