PGC tipped to announce details of cash raising

Market chatter and the company's own commentary suggest Pyne Gould Corp is close to finalising plans for its long-awaited capital raising, with one source tipping that details may be released to the market next week.

PGC disclosed its intention to raise new capital two months ago and while some market players have become impatient for more information, suggesting delays may damage its prospects of a successful transaction, the company's original timeframe was for an announcement by the middle of this month.

Yesterday, the Business Herald received a tip from a credible source that regulatory approval allowing, more details would be released next week.

An announcement would serve to quell some of the speculation that has swirled around the venerable South Island company and others with whom its affairs are entwined including PGG Wrightson and South Canterbury Finance.

Both PGG Wrightson and South Canterbury which holds a 3 per cent stake in PGC have indicated they will also raise fresh capital.

Some of that speculation has been around how much PGC will seek to raise. The source said the figure of $160 million which had been bandied around may be well short of the mark.

PGC not only needs to bolster its balance sheet after purchasing $175 million in impaired property loans from finance company subsidiary Marac, it has also recently paid $18 million for 10 per cent shareholder and director George Kerr's Equity Partners Asset Management business.

Furthermore it needs new capital to fund its ambitions to turn Marac into a registered bank.

In the current credit-constrained environment, PGC sees consolidation opportunities for Marac which along with Reserve Bank capital requirements will require significant cash.

Meanwhile, PGC will likely have to stump up cash to maintain its current 20.7 per cent stake in PGG Wrightson should that company seek to raise capital via a rights issue.

Yesterday, meat processor Silver Fern Farms, which received 10 million shares in PGG Wrightson as part of a settlement relating to the botched Craig Norgate-led merger proposal, said it was looking to sell its 3.2 per cent stake.

Under the terms of PGG Wrightson's agreement with Silver Fern Farms it has 10 days to arrange a buyer and suitable terms. After that Silver Fern Farms could sell them via other parties or on market.

PGG Wrightson has said any equity raising may also include the introduction of a new cornerstone shareholder.

PGG Wrightson shares fell 2c to 71c yesterday while those in PGC were down 5c at $1.05.