RPC falls short of cash to top up escrow account

Article – Businesswire

Rural Portfolio falls short of cash to top up escrow account, can’t meet payments

Rural Portfolio falls short of cash to top up escrow account, can’t meet payments

By Jonathan Underhill

April 30 (BusinessWire) – Rural Portfolio Capital Ltd., the investment vehicle of Baird McConnon and Craig Norgate, can’t find the cash to top up its dividend escrow account or continue making payments on its preference shares.

The closely held company said it considered alternatives including proposing a moratorium on repayments but instead has made a proposal to Trustees Executors Ltd., the trustee for investors, that it believes would result in the “quick and cost effective” solution. It gave no details in its statement, saying preference shareholders would be advised “of the actions taken by the Trustee at the appropriate time.”

The shareholders of Rural Portfolio Investments “sincerely regret that the RPS programme is unlikely to be able to continue to its maturity date on 15 April 2011 due to lack of funds within the group,” it said in a statement.

The failure to make up a shortfall of $1.45 million in the escrow account, which was drained to make the latest six-monthly dividend payment on its $60 million of redeemable preference shares (RPS). The account is required to always hold enough for the next payment, in this case on Oct. 15, of $2.19 million.

The shortfall means Norgate and McConnon may have to monetise their remaining assets in the group. It holds a further 46.8 million shares of PGG Wrightson, 10 million shares in NZ Farming Systems and $742,314 sitting in the escrow account, a group of assets with a market value of $29.6 million at today’s prices.

Under the Security Trust Deed, Rural Portfolio had 30 days from the April 16 breach.

Last week, Rural Portfolio Investments sold about half of its stake in Wrightson, 6.4%, or 48.5 million shares, for 56 cents apiece, raising $27 million, using the funds to repay debt.

Wrightson shares dropped 5.4% to 53 cents today and Farming Systems was unchanged at 41 cents.

Rural Portfolio was deprived of the cash flow it had depended on to meet dividend payments when Wrightson suspended its own dividends expected in October 2009 and this month. At the same time, its holding in Wrightson was diluted by Wrightson’s placement and rights issue, which Rural Portfolio didn’t participate in.

The value of Wrightson shares has tumbled 47% in the past 12 months, while Farming Systems dropped 32%.

(BusinessWire)

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