Westland Milk Products, approved for a taxpayer-funded Provincial Growth Fund loan branded "corporate welfare" by some critics, says it would have been happy for the commercial terms to be disclosed but Government officials ruled them confidential.
The Westland dairy exporter, which in its 2018 annual report discussing a capital restructure said it had "relatively high debt and limited financial flexibility", is to get a $9.9 million interest-bearing, repayable loan towards a $22 million manufacturing plant project to produce higher-value goods.
The annual report noted Westland's cash flow for the year was below expectations, its milk payout to farmers was not competitive and "obtaining new capital would make a significant difference to the co-operative".
Westland's chief financial officer Dorian Devers told the Herald the company didn't ask for confidentiality. It had been imposed by MBIE, the ministry for business which oversees the PGF, which "didn't give a reason".
"One thing we can share is the terms are attractive to us. We could have financed this in other ways but the terms we have been given from the PGF are more favourable. It's a longer-term loan than we can get from a bank which is nice," Devers said.
An industry competitor who declined to be named said it was "bizarre" the Government would support a flagging participant for an amount that was "not material" while others with strong balance sheets applied to their banks for finance while making their own success in the $14 billion New Zealand dairy export industry.
Former ANZ Bank chief economist Cameron Bagrie, who is now a private consultant, said the loan set "a dangerous precedent" and appeared to be corporate welfare.
His view was generally supported by other business observers approached, who said it was another example of this Government's meddling in private enterprise, but would not go on record.
However, privately, the chairman of a successful listed company said the idea of applying for a PGF loan, if the commercial terms were favourable, was no different to applying for other state grants. He did not dismiss the Government's part in business development so easily.
Speaking to the Herald regional economic development minister Shane Jones, who announced the Westland loan last week as part of a $140 million PGF support package for the West Coast, said the loan was "classic economic development" for a neglected region, took a swipe at "Aussie" banks, and accused critics of a double-standard.
"West Coast economic stakeholders have told us they've been failed by the banks. The banks have a very simple approach - it's 'how much capital am I exposing and how much interest (is there)?'", Jones said.
"They don't give a fig in relation to jobs saved, strengthened infrastructure, concentric circles of economic development.
"Under our new approach within the Government, cost-benefit analysis when we consider capital allocations are no longer narrowly confined to the square that the Aussie banks impose on the New Zealand economy.
"I do believe it's economic development and what really rankles with me when these ACT grandees complain about corporate welfare is we have enormous amounts of capital being poured into Auckland through accommodation supplements, through a host of ways to enable them to host the America's Cup, to increase road capacity ... yet there is not a doubt in my mind this is improving the prospects of corporates living in Auckland.
"So I'm easily irked when there is a double-standard."
Asked if he was aware of Westland Milk Product's financial performance, Jones said he didn't want to comment specifically on the company.
"But I would say it is an enterprise based in a part of New Zealand that is going through a challenging transition - GDP is substantially reduced, legacy industries are being closed down. I'm part of a Government trying to introduce capital to help them in this transition."
He noted 47 officials are involved in administration of the PGF, and its appraisal committee had eight independent members, with delegated Cabinet ministers having the final sign-off of application recommendations.
Jones said he would look into why MBIE had deemed loan commercial terms confidential.
Asked by the Herald to comment on PGF loans to businesses Ruapehu Alpine Lifts ($10m) and Oceania Marine Group in Northland ($4.8m), Jones said the Crown was unlocking regional economic doorways.
In the case of Ruapehu Alpine Lifts, it was but one investor of many.
"If the Crown doesn't take and move boldly in some of these neglected regions and their problems are in many respects a problem of market failure, what are we actually saying?
"Is it morally superior to pay them the dole, pay them the DPB but not use the Crown's capital strength to enable businesses to grow and flourish?
"That's not what I came into politics for, it's not what NZ First stands for ... it does invert the orthodoxy of the last 30 years but hey, we said this is what we'll do, and we're doing it."
Westland Milk Products is a farmer-owned co-operative, which can trace its business legacy in the isolated region back 150 years. It employs 430 people.
In the 2018 financial year, it had 429 milk suppliers, down from 435 in 2017.
Revenue in 2018 was $693m, compared with $630m in 2017, and $588m in 2016.
Westland's total equity, chief financial officer Devers said this week, was $232 million.
Its total long-term borrowings were $232m.
Westland's annual report said the value of its tangible assets was $571m. The report said tangible asset value drove the company's tangible net worth calculation "which must be maintained above 37.5 per cent to comply with banking covenants".
Chief financial officer Devers said the current bank covenant compliance level was confidential.
"I can tell you it's above where it needs to be."
Milk payout in 2018 was $6.07/kg milksolids, in 2017 $5.18 and 2016 $3.88.
In comparison, Fonterra, New Zealand's milk price setter because it collects about 80 per cent of the country's raw milk production annually, paid its farmers $6.69/kg for their milk in the 2017-2018 season, $6.12 in 2017 and $3.90 in 2016.
However, Fonterra is not the country's milk payment leader with smaller manufacturers, including Tatua, Open Country and Synlait, often topping its milk payouts.