PGG Wrightson gets $25m back from Crafar

ALAN WOOD
Last updated 05:00 04/12/2012

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The balance sheet of New Zealand's largest rural services firm PGG Wrightson continues to strengthen with the repayment of a Crafar Farms loan of $25 million.

The total amount of debt held by the company has reduced from more than $400m in 2008 to less than $100m now.

The more healthy balance sheet could open up options for the company, including the potential to resume dividend payments to shareholders.

At its annual meeting in October PGG Wrightson said it would announce a dividend policy in the next 12 months.

The last PGG Wrightson dividend was paid on April 1, 2009. Any move to start paying dividends would be a board decision.

The $25m payment was slightly above expectations previously indicated and represents settlement of the Crafar Farms debt, chief financial officer Rob Woodgate said.

The payment, after Chinese company Shanghai Pengxin finally settled its purchase of the Crafar farms, had been organised by the receivers, Woodgate said.

Crafar Farms was placed into receivership in 2009 by a syndicate of lenders, including PGG Wrightson. Westpac bank and Rabobank were also owed money.

In 2011 PGG Wrightson sold its finance company subsidiary's "good loan" assets to Heartland New Zealand but retained some $100m of loans including troublesome or overdue amounts including the Crafar loan.

Since then PGG Wrightson has reduced the amount of loans held under its subsidiary PGW Rural Capital significantly.

Woodgate said the $25m would be applied to debt of $11m held by the rural capital facility with the balance to pay off core debt which totalled around $100m.

The $400m-plus level of debt held by PGG Wrightson peaked before a $250m capital raising in 2009. Under that restructuring Chinese-based Agria Corp built a stake and now owns 50.22 per cent of the rural services firm.

Woodgate said about $3m of the total of the retained finance company loans were outstanding, with the bulk of that amount expected to be paid by autumn next year.

"We think we can get through those without any [bad debt] provision."

Woodgate said the stronger balance sheet gave the company more flexibility.

"As far as acquisitions go . . . that's something the board will need to decide, but obviously, from my point of view, it puts us in much better financial health overall."

PGG Wrightson's strategy of retaining some of the troublesome loans had worked. The final settlement of the remaining loans, some with farm owners, would mark an "end of a chapter" regarding the company's finance arm, Woodgate said.

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