PGG Wrightson Finance, one of three lenders to the failed Crafar Farms, expects to get the bulk of its money back when the receiver sells the farms.
In a Double Shot interview with interest.co.nz, Chief Executive Mark Darrow said although he couldn’t provide specific numbers, PGG Wrightson Finance was very much the junior partner among the Crafar’s three lenders. The other two are Westpac and Rabobank.
“I think our balance sheet exposure is about 4% of the loan [total net money loaned to Crafars by the three lenders] so it’s quite small because we don’t have the capacity to lend the size that other banks do,” Darrow said.
The 16 Crafar farms, New Zealand's largest family owned dairy business, were put into receivership last October owing about NZ$216 million to their lenders after interest.co.nz revealed animal welfare issues at the farms. Although Darrow declined to comment on the specific size of the total loan to the Crafar farms or his company's share of it, based on a total figure of NZ$216 million, PGG Wrightson Finance's slice would be worth about NZ$8.6 million.
Receiver KordaMentha said last month it had received more than 50 offers for all or parts of the portfolio from a range of buyers. They have, however, signed a sale and purchase agreement with the Chinese backed Natural Dairy/UBNZ group led by businesswoman May Wang, which is conditional on Overseas Investment Office (OIO) approval and leaves the door open for them to accept a better offer or offers.
Darrow said KordaMentha was doing a “great job” and was now working on getting one or more back up offers to the conditional Natural Dairy/UBNZ offer, which is thought to be worth about NZ$213 million. He expected a sale for a fair value, but whether PGG Wrightson Finance got all its money and interest back remained to be seen. Darrow said he certainly expected to get most of the loan back.
“Absolutely. It’s not going to be a train wreck. They’re actually good farms, they’re in good places, there’s a good value to them so with a fair purchaser that’ll be fine,” said Darrow.
Separately, Darrow said PGG Wrightson Finance had achieved a record debenture reinvestment rate of 90% in June and reinvestments were running at similar levels this month. The rural lender, which is covered by the Crown retail deposit guarantee scheme until October and then the extended Crown retail deposit guarantee scheme through until December 31, 2011, reintroduced unguaranteed debentures in January. Darrow said the take up had been “really good.”
“Between the people who have specifically invested in us unguaranteed and those who invest in excess of NZ$1 million (and therefore aren't covered by the Crown guarantee), all up we would have close to NZ$50 million of unguaranteed deposits.”
The company's investment specials on its website offer a rate of 6.75% per annum on guaranteed deposits for 16 months and 8.5% for 24 months on unguaranteed deposits. PGG Wrightson Finance has a BB credit rating, which was the minimum required for inclusion in the extended Crown retail deposit guarantee scheme.
Aside from debentures, PGG Wrightson Finance also sources funding from bonds, equity, deposits and bank loans and is looking to accelerate the process of weaning investors off the Crown guarantee.
“Next year particularly there’s a big communication job to do with our deposit holders just to make sure they get comfortable in that transition phase, particularly in the second half of next year,” Darrow added.
It would have been better, he suggested, if the Crown guarantee had never been introduced at all. However, it had been so PGG Wrightson Finance had to work with it.
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