Cabinet weighs tough line over Enza losses

By FRAN O'SULLIVAN Assistant editor

The cabinet today is expected to put the heat on Enza, the largest apple exporter, over big foreign exchange losses.

The Government has not ruled out appointing a statutory manager if Enza does not stop deducting about $19 million of projected foreign exchange losses from growers' payments.

Enza chairman Tony Gibbs said last night that to legislate property rights away from any shareholder group to another group would "put New Zealand back into the financial dark ages."

"To put a solvent company into statutory management simply because it won't do what it is told by the Government is also equally wrong."

But Agriculture Minister Jim Sutton would not rule out the statutory management option.

"I don't rule anything out, but I am not going to go in with nuclear weapons at the first sign of trouble," he said last night.

"Obviously I have to look at all my options. My whole effort has been trying to bring Enza and the growers together.

"But there are no threats except the implied threat of making people aware that if this is not resolved by negotiation, the Government will have to look at what options are available to it."

The options were not plentiful.

Last week, Mr Sutton warned Enza that unless it made a public commitment by 5 pm last Friday to desisting from deducting the exchange losses, the Government "would review other options."

On Thursday, the company wrote back, saying it would be commercially imprudent to suspend grower deductions temporarily while there was uncertainty over contingent liabilities.

Mr Sutton's spokeswoman, Cathie Bell, said last night that the subject would be discussed at the cabinet today after Enza's failure to meet the Government deadline.

The threats - which Enza says were first made by Guy Wellwood, an official in Mr Sutton's office - have been stepped up as political pressure from apple growers intensifies for Enza shareholders to bear the full losses of previous speculative foreign exchange deals.

The Apple and Pear Board, which regulates the industry, last week issued a determination that Enza's predecessor, the Apple and Pear Marketing Board, had exposed the apple growers to further losses by the steps it had undertaken to mitigate foreign exchange exposures.

Mr Gibbs said that Enza's preference was for the rule of law to prevail.

An arbitration process - headed by former High Court Judge Sir Ian Barker - had been agreed and the company would abide by its determination.

In his July 18 letter, Mr Sutton said that if he heard nothing by the deadline, he would "have to assume that Enza is either unwilling or unable to participate in the negotiation settlement process which we have discussed on July 10, 2001.

"In this case the Government will have to assume there is no longer any realistic possibility of a negotiated agreement being reached on the liabilities issue."

Mr Gibbs was adamant that the Government had created the mess by setting an October 1 date for deregulating the industry in full knowledge of the turmoil that would be created.

"They should take responsibility for a negotiated settlement," he said. "I believe they should be contributing a large cheque to clean up the mess they have helped create.

"They have deregulated at the wrong time. If they had deregulated when we suggested, in October 2002, the market, growers and Enza would have been better prepared."

Enza's bankers had given it clearance to stop the grower deductions in line with an agreement made between the company and Mr Sutton.

The deal was to be a sign of good faith to growers battling Enza over liability for forex debts of $50 million - including the $19 million forecast for 2002 - so that negotiations over a settlement could proceed.

Enza has been deducting $4.50 a carton from suppliers' returns.