KEY POINTS:
Shares in rural services company PGG Wrightson were punished by investors yesterday after a public spat with Silver Fern Farms over compensation for a failed partnership deal.
PGG Wrightson's shares fell 22c, or 18.3 per cent, to 98c, compared with a 52-week high of $2.95 a share.
In September, PGG Wrightson missed the first instalment of a $220 million deal to buy half of Silver Fern Farms because it was unable to finalise bank credits, and Silver Fern Farms terminated the agreement in November.
On Tuesday, PGG Wrightson said it would provide $10 million against Silver Fern Farms' claim and wanted a settlement based on delivering benefits that would have been achieved by the original deal.
Silver Fern Farms chief executive Keith Cooper said PGG Wrightson was being antagonistic, the $10 million was totally unacceptable and the situation could "quite likely end up in litigation before the courts".
Market commentator Arthur Lim said the fact PGG Wrightson named a price had brought the potential liability back to the mind of the market, which had also been spooked by the situation involving Fisher & Paykel Appliances.
"In New Zealand we've had a gradual downturn in share prices but the Fisher & Paykel announcement a couple of days ago I think just brought it home that this global recession credit crunch is for real, it is now transparently hitting New Zealand companies," Lim said.
"PGG Wrightson is one that is perceived to be vulnerable because it is exposed to the whole commodity cycle thing, it is also perceived as having relatively high gearing."
Macquarie Equities noted in December that core debt at PGG Wrightson was likely to approach $400 million this year and that it needed to refinance $180 million in debt by
April.
Macquarie Equities said it saw an increasing risk PGG Wrightson would need to undertake a dilutive equity raising.
