Rural Portfolio finalising its funding

Craig Norgate's investment vehicle Rural Portfolio Investments is finalising funding to cover a payment to investors.

It has dropped plans for a new redeemable preference share issue that would have helped pay the bill.

Rural Portfolio Investments (RPI) owns 30 per cent of listed rural services business PGG Wrightson and is a joint venture between that company's chairman Norgate and Otago's McConnon family.

PGG Wrightson's share price crashed last month - at one point losing more than half its value and wiping more than $200 million off the firm's market capitalisation.

Market commentator Arthur Lim said the share price fell because of concerns about debt levels, the potential impact on earnings from the downturn, issues related to a failed partnership deal with Silver Fern Farms and refinancing at RPI.

"When the share price started dropping away it meant that investors in RPI weren't covered by the value of the shares," Lim said.

RPI is due to pay a total of $46.3 million for redeemable preference shares due on April 15 and, last month, said it was considering making an offer of new redeemable preference shares to help cover the cost.

The company has $102.5 million in such shares in total, before interest and redemption premium. But RPI last week said it was now at an advanced stage of finalising funding for the redemption of the preference shares due next month and so would not proceed with the proposed new offer.

"It then eliminates really the last concern that the market has got," Lim said.

"What we have seen in the last month or so is that ... [PGG Wrightson] came out with a result that was better than what the market expected, [and] showed that the company was holding its own in the downturn environment.

"They've refinanced and rolled over their debt [with the banks] so that takes the pressure off the company.

"Then there was the decision to go to mediation with Silver Fern."

Last month, PGG Wrightson confirmed it had agreed with ANZ, BNZ and Westpac to refinance a $475 million loan facility, while financial results for the six months ended December 31 showed revenue and operating profit after tax up 32 per cent to $738 million and $22.1 million respectively.

Meanwhile, meat processor Silver Fern Farms has agreed to mediation by former High Court judge Robert Fisher, QC, in relation to the failed deal in which PGG Wrightson agreed to buy half the co-operative for $220 million but missed the first instalment because it was unable to finalise bank funding.

More details are expected soon.

PGG Wrightson's shares closed up 6c at $1.06 yesterday, compared with a 52-week low of 59c.