KEY POINTS:
Businessman Craig Norgate is discounting suggestions that he could be forced to put new equity into company Rural Portfolio Investments (RPI) or to sell down the company's stake in PGG Wrightson.
RPI, owned by Norgate and Dunedin's McConnon family, has a 30 per cent stake in agricultural services company PGG Wrightson.
National Business Review reported on Friday that RPI relied on the PGG Wrightson stake to meet interest obligations on its two listed debt issues, including $44.6 million in five-year redeemable preference shares which mature in April next year.
The newspaper said RPI was in danger of breaching financial covenants attached to the preference shares bought by investors in 2004.
According to the financial covenants outlined in the prospectus, PGG Wrightson's debt to ebitda ratio must not exceed four times.
But Norgate, who is chairman of PGG Wrightson, said the article was a "misinterpretation of the original covenants".
In 2004 RPI had owned just over 50 per cent of what was then Wrightson "so we were grouping the Wrightson debt. That's no longer the case."
The ratios did not apply now and a breach of them, even in 2004, would not have resulted in RPI having to sell shares or put equity in, Norgate said. Both suggestions that he could be forced to put new equity into RPI or risk having to sell down the PGG Wrightson stake were "inaccurate".
On Wednesday, PGG Wrightson said its net earnings for the year to the end of next June were likely to be within the range of $39 million to $45 million, compared to previous earnings guidance for a range from $46 million to $51 million.
In the year to June 2008, the company recorded net earnings of $39.2 million.
"The reality is PGG Wrightson's profit is forecast to be up on last year. Whilst it's a downgrade, it's still a bloody great result given what's going on globally," Norgate said.
PGG Wrightson has an 11 per cent stake in NZ Farming Systems Uruguay (NZFSU), which has about 36,000ha of dairy farms in Uruguay, South America.
On Thursday NZFSU said earnings before interest and tax were now anticipated to be a loss in the range of US$7 million ($12 million) to US$11 million. Norgate was expecting NZFSU to be profitable in 2009/10.
On Thursday PGG Wrightson shares fell 23c to $1.30, while NZFSU shares were down 15c to 60c a share. By the close on Friday PGG Wrightson shares were at $1.15 - down another 11 per cent.
- NZPA
