KEY POINTS:
An upbeat Craig Norgate has allayed market fears over the debt refinancing of PGG Wrightson, signing a deal with his bankers to bring the business back from the brink.
The rural services provider yesterday confirmed it had reached an agreement with its three banks - ANZ, BNZ and
Westpac - to refinance a $475 million loan facility.
The debt had not been due for renewal for several months, but PGG decided to renegotiate it early in the face of tough economic conditions which last year sank its deal to buy a $220 million stake in Silver Fern Farms at the last minute.
Chairman Craig Norgate told a packed room of analysts and journalists he was there to tell a good news story and joked that the Prime Minister would be glad he would not be calling him to ask for support.
Norgate said the banking arrangement had been signed just that morning, in time for the half-year results, although the company had been working with the banks for the past couple of months to work out the deal.
"We had asked the banks to work to this deadline, but you have got to appreciate they have a lot of things to work on at the moment."
PGG Wrightson shares closed up 7c to 79c a share yesterday, having fallen by more than 50 per cent last week.
Managing director Tim Miles said it was not easy for any business to re-finance at the moment but PGG wanted to provide as much clarity as it could in the current climate.
It had been an extremely busy six months for the business, which had achieved a strong trading performance, boosted by its seeds business and animal nutrition arm.
Operating profits after tax were up 32 per cent to $22.1 million and revenue was also up 32 per cent to $738 million for the six months.
But the net profits were hit hard by one-off costs. The mainly non-cash write-offs totalled $47.2 million, with $35.2 million relating to its investment in New Zealand Farming Systems Uruguay and $9.3 million to hedge fund contracts.
A further $17 million was linked to the failed Silver Fern Farms venture for which it has put aside $10 million as a provision to go to Silver Fern.
But questions remain over whether this will be enough to cover the compensation to Silver Fern Farms, with discussions now headed into mediation.
Miles said PGG had not put together the $10 million figure lightly and it was not the only offer it was making to Silver Fern Farms. A proposed supply chain and procurement deal would put the total compensation at much more than $10 million.
"In our view we have put forward something more than $10 million."
Norgate said he did not want to comment any further on the compensation offer. PGG had been obliged to reveal the figure to the stock exchange but he would have preferred to have kept it behind closed doors and resolved it through mediation.
Norgate was also reluctant to discuss the position of 30 per cent shareholder Rural Portfolio Investments, of which he is a shareholder in conjunction with the McConnon family.
But he confirmed that RPI was in the process of refinancing $45 million and said it was in an advanced stage of doing this.
He also reassured investors that RPI would not have to sell shares in PGG to meet its debt obligations.
But analysts say the two factors remain clouds over the company.
Market commentator Arthur Lim said the sooner RPI could complete its re-financing the better. "It is a distraction that they don't need."
He said the failed Silver Fern Farm deal and the cost of settling that would also continue to cloud the business until it was resolved.
