November 28, 2024
The Chinese company that bought Darwin Port under controversial circumstances nine years ago is scrambling to sell assets and pay down debt to stave off creditors and avoid a forced sale of its key Australian asset.
The Northern Territory government is so worried about the situation that it has written to the Chinese-owned Landbridge Group seeking further information about its ability to meet its financial obligations, and has said it is reviewing its rights.
The possibility that Darwin Port could be taken back from its Chinese owner was welcomed by Coalition MPs, who believe the most important maritime port in northern Australia should never have been sold to them.
Shandong Landbridge Group defaulted on a 500 million yuan ($107 million) bond this year, prompting auditors PwC to warn that its local subsidiaries which own the port and rely on the Chinese parent for ongoing funds were in a precarious position.
''In the event the parent entity is unable to restructure its debt, an insolvency event could occur,'' PwC said in its financial report for the year to June 30, filed with the Australian Securities and Investments Commission. ''A material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern,'' it said.
In 2015, Landbridge paid $506 million to secure a Northern Territory government tender for a 99-year lease over the port, which the government considers a strategic maritime asset in northern Australia.
The sale led former US president Barack Obama to express his displeasure to then prime minister Malcolm Turnbull when the lease was first signed, given that up to 2500 US Marines rotate through Darwin each year.
In 2021, amid growing tensions between Canberra and Beijing, the Coalition ordered a review of the deal, citing national security concerns. The Defence Department review found there were insufficient grounds to scrap the lease.
Landbridge is restructuring its debt via a refinancing of the $107 million bond that is in default, as well as the group's broader debts.
The restructuring is likely to include asset sales in China, although not Darwin Port.
''Landbridge in China has a portfolio of large infrastructure assets, and it is looking to moderate its debt which will likely see the sale of some assets across the group,'' a spokesman for the Chinese company said.
''Importantly, Darwin Port remains a key asset of the group noting its recent performance, continued strong growth prospects as a gateway to Asia, and its positive contribution and engagement with the local economy.''
Landbridge hopes to finalise the restructuring by early next year but has warned that it could take until the end of 2025. If it cannot refinance its debts and its creditors move in, that could spark an insolvency event with serious consequences for its port ownership because the change in ownership could constitute an event of default. If the default is not rectified within 60 days, a third party would be assigned to sell Darwin Port to raise money for the financiers, according to financial statements filed for the local company.
If a sale is not secured within 18 months, the Northern Territory government has the right to scrap the port's lease and pay out the financiers.
The NT government has written to Landbridge asking for information on its ability to meet payment obligations, and territory treasurer Bill Yan will meet Infrastructure Minister Catherine King in Canberra today.
''The Northern Territory is reviewing our rights, and our future action will be made in the best interests of Territorians,'' a spokesman said.
Coalition home affairs spokesman James Paterson said a default would be ''an opportunity'' to get the port back into Australian hands. ''The Albanese government must not squander it,'' Senator Paterson said.
''They should use the full powers available to them under the [Security of] Critical Infrastructure Act and through the Foreign Investment Review Board to ensure the lease is given to an operator who is not subject to the control of a potential strategic adversary.''
Former Nationals leader Barnaby Joyce echoed that sentiment, saying it could be a ''blessing in disguise'' for Australia because it would be a ''mechanism to repair a serious problem that I hope we never replicate''.
In 2023-24, Landbridge Infrastructure Australia incurred a loss of $37 million, compared with the $26 million loss recorded in 2022-23.
