Cheesemaker to be restructured as $250,000 injection clears debt, reports Andrea Fox .
Sir James Wallace, chairman of Waitoa's Wallace Corporation and noted art collector, has agreed to be a white knight for the troubled artisan cheesemaker Kaimai Cheese, injecting $250,000 of new capital as a cornerstone shareholder.
In a letter to shareholders, Waharoa-based Kaimai Cheese said the new capital would address the company's immediate cash shortfall, as it works through a restructure after debt and operational issues.
A spokesman for Wallace said his investment was a personal one. He had a long association with Kaimai shareholder and director John Luxton.
Kaimai in October told a special shareholders meeting it needed a $450,000 cash injection to address its debt problem and to provide adequate working capital for its operations.
It was expected that at the completion of the restructure the only debt owed by the business would be bank debt of just over $2.5 million.
The letter said other options for acquiring the required new capital included a rights issue to all shareholders at 10c a share and discounting existing shareholder loans and converting them into shares or their equivalent.
It had been suggested at the meeting that a rights issue would at best raise about a third of the capital needed. It would also require a registered prospectus which had to include completed audited accounts less than nine months old. But the audit would not be completed by Christmas.
Kaimai had negotiated with trade creditors to write off an additional debt of about $100,000. The balance of trade creditors would be fully repaid.
Another option was larger contributions from other shareholders. The law permitted experienced investors to invest larger sums without requiring a prospectus and interested shareholders were asked to contact directors.
Shareholders agreed to defer the annual meeting until the audit was completed.
The meeting heard there were major compliance issues the company needed to work through to restructure. Legal and taxation specialist advice obtained since the meeting suggested that Kaimai's accumulated losses meant there was negative equity in the existing company, the letter said.
Only a properly implemented restructuring plan could restore value.
It had also been recommended that Kaimai should form a limited partnership. The assets and liabilities of the company would be transferred to the new partnership, which would likely have three limited partners - the existing Kaimai Cheese company, Wallace interests and Luxton & Co.
The letter said the new partnership would be managed by a general partner, which would be a new company formed for the purpose. Kaimai would elect three representatives to a five-member board. All capital transactions would take place at an equivalent price of 10c a share.
Under this structure the tax losses would remain with the original company for the benefit of existing Kaimai shareholders, the letter said.
The new partners would not be able to access the tax losses.
The proposal had to be approved by 75 per cent of votes and proxies at a shareholders meeting.
Considerable and complex work needed to fully develop the proposal would be done over the next month, and it was proposed to hold the annual meeting in late January or early February, the letter said.