South Canterbury Finance has agreed to lend NZ$25 million to PGG Wrightson (PGGW) in a subordinated loan facility that can be converted into PGG Wrightson shares within 90 days at NZ$1.50 each. The loan is to help South Canterbury pay a settlement to Silver Fern Farms over their failed merger last year. "These are two iconic agri-business companies whose importance to the New Zealand economy cannot be under-estimated," South Canterbury Finance Chairman Allan Hubbard said in a statement. "Their size and industry focus demand that they be supported because their businesses are essential to the New Zealand community." "South Canterbury Finance has assisted the mediated settlement that will allow both parties to avoid a wasteful legal dispute and concentrate on generating more wealth for their stakeholders and New Zealand," Hubbard said. Separately, PGG Wrightson and Silver Ferm Farms announced they had settled their dispute, with PGGW paying Silver Fern NZ$25 million in cash on top of NZ$5 million already paid, and 10 million shares PGGW shares. Meanwhile, PGGW said it had completed refinancing with its banks, which included a NZ$475 million facility through ANZ, BNZ and Westpac. "The banking package includes a $125 million amortising facility to be paid down over the period to December 2010 through operating cash flow, working capital initiatives and the sale of some non-core assets," PGGW said. PGGW CEO Tim Miles said in a statement the extra debt would increase the group's interest expense by about NZ$2.5 million for the current financial year. "The effect in future years would be significantly less as PGW would benefit from the current fall in interest rates, whereas this year that benefit is not being realised due to interest rate hedges that are still to expire," he said. * This article was first published yesterday in our daily email subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.
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