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New Zealand's biggest meat processor Silver Fern Farms is asking its banks for a waiver after the falling dollar caused it to breach a banking covenant.
The company said it was following accounting practice relating to its foreign currency hedging.
"As a result of this, and due to the recent rapid decline of the New Zealand dollar against the US dollar, Silver Fern Farms has advised its banks that it is not currently in compliance with its minimum shareholders' funds covenant."
Chief executive Keith Cooper said the non-compliance had nothing to do with business funds and the company had not breached any earnings covenants.
"No one foresaw such a drop [in the dollar]," Cooper said.
"It's nothing to do with cash flows or anything like that, it's essentially a non-cash item. It's purely a hypothetical what-if measure at month end."
The Dunedin-based co-operative had requested a waiver from its banks, which were considering revising the covenant to accommodate such volatility.
The company hedged its foreign currency exposures, a portion of which was in advance of actual requirements.
The portion that does not get applied against stock and debtors is valued at the current currency market, creating a gain or loss depending what the rate is compared to the hedged position.
The breach was a technical issue, Cooper said.
"It's a timing issue," he said. "It's valued at the month end and it changes every month end and it will quite quickly reverse itself out but at the time of the measure it causes this non-compliance."
The non-compliance related to Silver Fern Farms' banking facilities and not its bonds.
