South Canterbury Finance has agreed to lend NZ$25 million to PGG Wrightson (PGGW) in a subordinated loan facility that can be converted into PGG Wrightson shares within 90 days at NZ$1.50 each. The loan is to help South Canterbury pay a settlement to Silver Fern Farms over their failed merger last year.

"These are two iconic agri-business companies whose importance to the New Zealand economy cannot be under-estimated," South Canterbury Finance Chairman Allan Hubbard said in a statement. "Their size and industry focus demand that they be supported because their businesses are essential to the New Zealand community."

"South Canterbury Finance has assisted the mediated settlement that will allow both parties to avoid a wasteful legal dispute and concentrate on generating more wealth for their stakeholders and New Zealand," Hubbard said.

Separately, PGG Wrightson and Silver Ferm Farms announced they had settled their dispute, with PGGW paying Silver Fern NZ$25 million in cash on top of NZ$5 million already paid, and 10 million shares PGGW shares.

Meanwhile, PGGW said it had completed refinancing with its banks, which included a NZ$475 million facility through ANZ, BNZ and Westpac.

"The banking package includes a $125 million amortising facility to be paid down over the period to December 2010 through operating cash flow, working capital initiatives and the sale of some non-core assets," PGGW said.

PGGW CEO Tim Miles said in a statement the extra debt would increase the group's interest expense by about NZ$2.5 million for the current financial year. "The effect in future years would be significantly less as PGW would benefit from the current fall in interest rates, whereas this year that benefit is not being realised due to interest rate hedges that are still to expire," he said.

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5 Comments

by dazza | 27 Apr 09, 5:12pm

Think this is a typo

Think this is a typo Bernard. Monday hah?
"The loan is to help South Canterbury pay a settlement to Silver Fern Farms over their failed merger last year."

by John B | 27 Apr 09, 5:51pm

These guys are in now

These guys are in now in even deeper debt up to and over their eyeballs,
and debt is a four letter word.

Banks rolled facility - Yeh right.
Couldn't get it back if they tried. Lent them too much with hindsight.

Watch this space.

by sam.p | 27 Apr 09, 7:04pm

Another evidence supporting the fact

Another evidence supporting the fact that government guarantee for private finance companies is a moral hazard.

by Andrewj | 27 Apr 09, 7:20pm

South Canterbury Finance rises money

South Canterbury Finance rises money using the Govt deposit guarantee to help out WPGG?
South Canterbury finance have lend a lot of money to Dairy conversions in the South Island, Interest capitalised,its an intriguing world is the world of Finance. WPGG need to sell off the finance arm ,the arm thats being growing its profits at %80 pa hmmm, but how good is its loan book how many are sub-prime? Wrightson sold their finance arm to Rabo, nows its coming around again, just got a PGG after it.Real estate was the other profitable arm, its dropped off,we are going to have an armless WPGG heading down the river.Maybe south Canterbury want its Finance arm, its probably legless.Wheres the head?
Sad its all going to fall down. Being fascinating while its been happening, never a dull moment.

by Andrewj | 27 Apr 09, 7:48pm

I forgot to add the

I forgot to add the National bank had a good piece in the farmers weekly.Warning farmers of the debt held by many co-ops. Also that Fonterra's %20 equity means that farmers wishing to buy shares may need to rethink. Wonder where Fonterra will get the money if farmer suppliers under contract refuse to buy shares,another bond issue coming up?