The Govt can exit the $10m loan deal with Westland if there is a major ownership change

Regional Economic Development Minister Shane Jones awarded Westland the $9.9m loan late last year. Photo / George Novak

The Government has included a clause in its $10 million loan contract to Westland Milk which allows it to exit the deal in the event of a major change in ownership.

This comes as the dairy co-operative's Chairman Peter Morrison confirmed Westland had "entered into a strictly confidential discussion with a select number of interested parties."

Although Morrison won't confirm who the interested parties were, the Australian has reported Canadian dairy giant Saputo was eyeing up the co-op.

This may prove to be problematic for Westland, given its $9.9 million loan from the Government's Provincial Growth Fund (PGF) late last year.

In a statement, Regional Economic Development Minister Shane Jones said although the contract between the Crown and Westland was still being finalised, the PGF reserves the right to revisit any funding decision prior to a contract being entered into.

"[The contract] will include conditions that will give the Crown the right to exit the contract in cases of major ownership changes, should that be deemed appropriate.

"PGF loan contracts contain a 'change of control' [clause] which would trigger an 'event of default,' in the event that there is any change of control without prior approval of the Ministry of Business, Innovation and Employment (MBIE)."

National's Economic Development spokesman Paul Goldsmith said if Jones can release this detail of the likely contract, why can't he come clean on the interest rate and term so the public can judge the real subsidy.

Those conditions of the loan still remain largely under wraps.

MBIE, which oversees the PGF, had refused a Herald request under the Official Information Act for interest rate and term details of the loan.

MBIE said the request was refused because the contract negotiations were still underway and releasing the material before the contract was final risked compromising the negotiations.

This was despite Westland saying it would be happy for the commercial terms to be disclosed.

Asked why the Government would not reveal these conditions of the loan, Jones stuck to the same line as his officials.

"Interest rates on loans, much like home mortgage terms, may vary throughout the term and also, therefore, between projects depending on the industry, value and estimated length of the project.

"It is important for the PGF to retain the trust and confidence of the businesses we work with, by keeping sensitive and commercial information confidential."