KEY POINTS:
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, a leading figure in the agriculture sector and Dunedin's McConnon family, has a 30 per cent stake in agricultural services company PGG Wrightson.
National Business Review reported today 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, told NZPA 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, Mr 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 from $39m to $45m, compared to previous earnings guidance for a range from $46m to $51m.
In the year to June 2008, the company recorded net earnings of $39.2m.
"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.
"The dividends were very high last year, well above what we needed. I can't comment on what (PGG Wrightson's) likely to pay in terms of dividends going forward. That's a matter for the board but the dividend policy's well known."
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.
Yesterday NZFSU said earnings before interest and tax were now anticipated to be a loss in the range of US$7m ($12m) to US$11m, compared to an analysts' consensus range of US$8m to US$10m indicated in October.
Norgate said comments in the NZFSU release made it absolutely clear the company was dealing with "a one year issue". He was expecting NZFSU to be profitable in 2009/10.
Yesterday PGG Wrightson shares fell 23c to $1.30, while NZFSU shares were down 15c to 60c a share.
By mid-afternoon today PGG Wrightson shares were down a further 7c to $1.23, while NZFSU shares were unchanged on 60c.
- NZPA
