SFF Stoush Raises Doubts Over Wrightson Debt Levels
February 23rd, 2009
The prospect of PGG Wrightson having to pay substantial damages to Silver Fern Farms over its failed deal to buy half of the meat processor has thrown the spotlight on the strength of Wrightson’s balance sheet. Wrightson’s share price has tumbled as investors grow weary of the company’s financial position. The rural services company has almost $180m of debt coming due in the next few months and total debt may balloon to almost $400m this year, against shares valued at $366m. It can’t count on a performance fee from NZ Farming Systems Uruguay, which has just posted a net loss of $US8.9m, and is feeling a cold chill from the EU’s exhumation of dairy export subsidies.
Lack of thought. Wrightson went unconditional on its $220m offer for half of Silver Fern, and its $10m offer of compensation and mediation has only inflamed SFF. Forsyth Barr analyst, John Cairns, is scathing of how the SFF deal was approached. “How could they possibly get themselves in that position, entering into an unconditional contract without securing your funding lines?”
Optimism evaporates. For Craig Norgate, debt maturities are also looming for RPI Investments, the vehicle he owns with Baird McConnon, which has $42.5m of its notes maturing in April. NZ Farming Systems chairman, Keith Smith, says international prices appeared to bottom out prior to the EU’s actions while the US culling cows and marginal milk producers disappearing is further reason for optimism. However, he warns reimposed export subsidies “now appear likely to prolong the period of lower milk prices” until at least the third quarter.
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