Nervous banks within PGG Wrightson's syndicate of banks effectively killed its plan to buy half of Silver Fern Farms yesterday in one of the first signs that the intensifying global Credit Crunch is affecting financing in the real economy. The deal was due to settle this week after PGG Wrightson raised most of the funding necessary through share issues, although bank bridging finance was necessary by October 1 to ensure an earlier equity raising was not declared null and void. The refusal of PGG Wrightson's syndicate to provide that bridging finance effectively scuttled the deal. PGG Wrightson was due to hand over NZ$145 million to Silver Fern Farms yesterday as part of the NZ$220 million purchase price. PGG Wrightson Chief Financial Officer Mike Sang told interest.co.nz PGG Wrightson had planned to raise NZ$100 million through a placement of shares to institutional investors, but volatility on international markets meant it was only able to raise NZ$78.1 million, which had caused "some disquiet" with some of PGG Wrightson's banks who were due to provide bridging finance in the form of subordinated debt.
"The basic premises for the deal are still sound, but in the current credit environment you have to do things a little bit differently," Sang said. PGG Wrightson announced on September 28 it had successfully completed the issue of 43.4 million shares at NZ$1.80 each to local and international institutional investors to raise NZ$78.1 million. Goldman Sachs was the lead manager. That deal is now declared null and void. It also announced on Monday that South Canterbury Finance owner Allan Hubbard would underwrite a rights issue to retail investors at NZ$1.80 a share to raise NZ$32 million. But it turns out the cash for the deal would not have been available until mid November, which was too far away for the banks to be comfortable providing bridging finance, Sang said. PGG Wrightson Chairman and the deal's architect Craig Norgate told the NZ Herald the deal had been delayed because of the financing issues, but would still be pursued. "The delay is likely to be counted in weeks rather than days, but last night's events in the United States - the failure of the administration's bailout proposal to be approved by the House of Representatives and the resulting nosedive on Wall Street - could not have come at a worse time," Norgate was quoted as saying. Pyne Gould Corp, which owns 21.6% of PGG Wrightson and owns all of Marac Finance, declined to participate in the share issue. The names of the banks in the PGG Wrightson syndicate was not immediately available, but PGG Wrightson Finance has a NZ$100 million funding line with ASB