PGG tight-lipped on its exposure to Crafar Farms' $200m debt

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PGG Wrightson Finance is keeping mum on what it has lent to Crafar Farms, which is in receivership, but it has about $150 million of dairy loans all up.

PGG Wrightson Finance head Mark Darrow said he was not able to reveal its part of the banking syndicate's lending to Crafar Farms but PGGW was a "very junior" party.

The others in the banking syndicate are Westpac and Rabobank and Crafar Farms is reported to have about $200m of debt to the syndicate.

Of PGGW Finance's $630m finance book, dairy loans made up 24 per cent – about $150m.

Mr Darrow said PGGW Finance's lending was 100 per cent to agriculture and was spread across several sectors including sheep and beef farming.

Its exposure to dairying was a lot less than the national average, he said.

Of the $46 billion that had been lent to the agricultural sector in New Zealand (Reserve Bank estimates) 61 per cent was made up of dairy loans.

About 95 per cent of total agricultural sector lending came from the big five players, National/ANZ, ASB Bank, Westpac, BNZ and Rabobank.

Asked whether PGGW Finance would need to increase provisions for the Crafar loans, Mr Darrow said the question assumed PGGW Finance would make a loss on this lending and that might not be the case.

The receivers had said there was not going to be a fire sale and the farms were in sought-after dairying areas.

Asked about the state of its dairy loans, Mr Darrow said: "I think generally we are reasonably happy with them." The recent lift in the next season's payout and rising prices at Fonterra's auctions were positive for dairy farmers.

PGGW Finance had slowed its lending considerably and was focusing on existing customers and "waiting for the market to settle".

"We are still doing new lending but we are not out buying market shares."

The difference was the aggression with which a bank or finance company sought new customers. Non-bank finance companies had to have a credit rating by March this year, Mr Darrow said, and PGGW Finance would be seeking one.

- © Fairfax NZ News