Reports of asset sales wrong, says Wrightson chairman

Keith Smith. Photo / Kenny Rodger

Rural supplies company PGG Wrightson says key assets are not on the block.

In a letter to business and rural media outlets, PGG Wrightson chairman Keith Smith said reports that businesses such as Seeds and Fruitfed Supplies were up for sale are entirely wrong.

"PGG Wrightson is not offering to sell businesses that form part of its operating core," said Smith.

At its full-year results briefing last month the company had said it would consider the sale of "selected assets" and raise equity, saying investment banks First NZ Capital and UBS had been engaged to conduct a review.

In June, PGG Wrightson had notified its lenders of a potential breach of its banking covenants.

Its renegotiated banking package has allowed $197.9 million in debt maturing on August 31, 2012 to be reclassified as term debt.

Bankers have provided a term-debt facility for that amount maturing on August 31, 2012, (previously $275 million expiring September 30, 2011).

Its most immediate pressure comes from a loan of $200 million due to be fully repaid by March 31, 2010 - previously $125 million expiring in December 2010 - and working capital of $75 million that matures on August 31, 2011, which was previously due to mature in April 2010.

It has overdraft and guarantee facilities of $40 million, and South Canterbury Finance has agreed to extend its debt to February 2013.

Forsyth Barr analyst John Cairns said the lending syndicate is "really turning up the heat", wanting $200 million repaid within seven months.

"What that's saying is the banking syndicate is exerting more control. They're demanding progress," said Cairns.

Cairns said the company was unlikely to sell its Seeds business, which he described as the jewel in the crown, or the rural supplies arm that provides the platform for selling a wide range of goods and services to farmers.

Cairns said the finance company has been identified as a potential candidate for sale.

The letter from Smith yesterday took a swipe at media reporting of its results, in particular "the widespread focus on the capital position of the company".

"My concern is that this has given rise to extensive comment that is speculative, uninformed and often wildly inaccurate," said Smith.

The company reported net operating earnings after tax of $30 million for the year to June, with a net loss after tax of $66.4 million when one-off items totalling $96.4 million were taken into account.

- ADDITIONAL REPORTING: NZPA