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  1. #511
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    thanks for your report snoopy
    He who lives by the crystal ball soon learns to eat ground glass. (Edgar Fiedler)

  2. #512
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    Thanks Snoopy, 10% interest for not settling comercial contract could be bit hopefull.

  3. #513
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    Quote Originally Posted by forest View Post
    Thanks Snoopy, 10% interest for not settling comercial contract could be bit hopefull.
    I didn't pull that 10% figure out of a hat Forest. That 10% per annum is the actual interest rate agreed in the contract with Silver Fern Farms (Meats). And just to make things quite clear, that interest rate on the outstanding balance *applies if the contract is settled* after 30th September 2008. Obviously it is now after 30th September 2008, so that interest rate applies.

    If the contract is *not settled*, then we have another ball game entirely.

    SNOOPY
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  4. #514
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    Quote Originally Posted by Mick100 View Post
    thanks for your report snoopy
    Glad to hear you haven't thrown yourself under a combine harvestor Mick, what with all the market troubles. Are you still a PGW shareholder?

    Here is a weekend puzzle for PGW shareholders to ponder (no I don't know the answer). I am trying to reconcile the divisional EBIT figures quoted throughout the operational review text with the segment reporting information on page 42.

    The 'Segment net profit before tax' figures roughly tie in, except in 'Rural Services' where EBIT is $40.1m (p8) and 'Segment Net Profit before Tax' is $24.5m (p42). Why the difference?

    SNOOPY
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  5. #515
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    Quote Originally Posted by Snoopy View Post
    Here is a weekend puzzle for PGW shareholders to ponder (no I don't know the answer). I am trying to reconcile the divisional EBIT figures quoted throughout the operational review text with the segment reporting information on page 42.

    The 'Segment net profit before tax' figures roughly tie in, except in 'Rural Services' where EBIT is $40.1m (p8) and 'Segment Net Profit before Tax' is $24.5m (p42). Why the difference?
    Snoopy, the rural services business is allocated the bulk of liabilities under segment liabilities and I would think therefore incur considerable interest charges.

    Financial services is probably less affected by interest on their liabilities as these are offset by interest income from financial assets.

    Btw, here's something from the PGC agm yesterday.... I can't quite decide what that first paragraph means in terms of PGW - that PGC doesn't want to keep funding PGW? Or am I misunderstanding that?
    Most of you will be aware that MARAC operates today with a high level of liquidity in its business. That has been the completely right strategy for us. But as we are presently configured, it is a strategy which creates tension for us because the initiatives in PGG Wrightson which we have supported as completely right for that business and its farmer clients, also make demands for capital.

    And looking into the future we do not expect that situation to change. And so we have to rationalise things, but we are in no rush to do so. Our present timing contemplates that we will have the banking licence in place later in this financial year. But if events require it we have some flexibility around this timing. There has been some market speculation that we are about to offload our interest in PGGW. We have no such plans and divestment will not happen without a carefully thought through strategy which secures the best outcome for PGC shareholders.

    One of the options we have is for some form of in specie distribution of those shares to PGC shareholders. We are still working through that possibility and others and it is too soon for me to confirm just what the outcome will be.

  6. #516
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    Quote Originally Posted by Lizard View Post
    Here's something from the PGC agm yesterday.... I can't quite decide what that first paragraph means in terms of PGW - that PGC doesn't want to keep funding PGW? Or am I misunderstanding that?

    "Most of you will be aware that MARAC operates today with a high level of liquidity in its business. That has been the completely right strategy for us. But as we are presently configured, it is a strategy which creates tension for us because the initiatives in PGG Wrightson which we have supported as completely right for that business and its farmer clients, also make demands for capital."

    "And looking into the future we do not expect that situation to change. And so we have to rationalise things, but we are in no rush to do so. Our present timing contemplates that we will have the banking licence in place later in this financial year. But if events require it we have some flexibility around this timing. There has been some market speculation that we are about to offload our interest in PGGW. We have no such plans and divestment will not happen without a carefully thought through strategy which secures the best outcome for PGC shareholders."

    "One of the options we have is for some form of in specie distribution of those shares to PGC shareholders. We are still working through that possibility and others and it is too soon for me to confirm just what the outcome will be."
    O.K. Liz, I think I can put those comments into context. Sam Maling the chairman of PGC is also a director of PGW and by co-incidence was up for re-election at the PGW AGM the day before the PGC AGM. In his PGW re-election speech, Maling launched into this long spiel on PGC and how their relationship with PGW, as regards PGW's expansion plans, has been misunderstood by the media.

    As you know PGC has plans to become a bank and presumably they will use the 'Marac' brand to do so. I think what is being said is that having PGW, a company that is hungry for investors funds for new initaitives, as a 'client' of the new Marac bank would mean that Marac would not be able to maintain the high level of liquidity desired in today's financial markets.

    PGWs industry meat and wool initiatives are long term. 'Marac Bank' could not fund such projects if a whole lot of deposit holders wanted their money 'out' in a years time. It is also possible that having such a large relationship with just one client might be a risk factor for the new 'Marac Bank', that the NZ Reserve Bank that oversees banking licences would not approve of.

    My take on what was said at the PGC AGM is that PGC supports the initiatives that PGW is taking as 'right' for PGW and 'right' for major shareholder PGC. But that these plans are not compatible with PGC becoming a bank, given PGC's scale. Thus some form of amicable divorce will be necessary between PGCs future banking activities and PGW.

    SNOOPY
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  7. #517
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    Yes, that is how I read it too. That implies PGW will need to renew all or part of their financing at some point via an alternative bank or finance company, doesn't it?

    What does this mean in terms of the likely interest rates and conditions they are likely to have? Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!

    In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?

  8. #518
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    Quote Originally Posted by Lizard View Post
    Snoopy wrote
    "My take on what was said at the PGC AGM is that PGC supports the initiatives that PGW is taking as 'right' for PGW and 'right' for major shareholder PGC. But that these plans are not compatible with PGC becoming a bank, given PGC's scale. Thus some form of amicable divorce will be necessary between PGCs future banking activities and PGW."

    Yes, that is how I read it too. That implies PGW will need to renew all or part of their financing at some point via an alternative bank or finance company, doesn't it?
    'Financing' I understand in this context, to be referring to PGW's bank debt. PGW has term bank facilities of $304m and current bank facilities of $174m (AR2008 p28). None of these are with Marac, as Marac is not a bank yet. These facilities will from time to time come up for renegotiation. But these renegotiations will not be crystallised by Marac becoming a bank.

    A wider view of 'financing' would see PGC as an 'equity financer' of PGW. If PGC sells down their holding in PGW, then the 'equity financing' of PGW will change. But this would only be a factor if PGW undertook a cash issue. I believe this is unlikely. That is because the largest PGW shareholder 'Rural Portfolio Investments' is heavily debt funded. RPI wouldn't be able to raise the money for a large cash issue. Principal Norgate, who also happens to be chairman of PGW, knows this. So he won't put RPI in a position of having to cough up cash. Equity funding will IMO be done by a placement of shares to institutions, as per the last (failed) offer that got pulled on September 30th.

    What does this mean in terms of the likely interest rates and conditions they are likely to have?
    No effect. See explanation above.

    Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!

    In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?
    I don't think PGC exiting necessarily means a downward price spiral for PGW. If PGC sell their holding in one block, it will mean a takeover offer for PGW by whoever acquires PGC's stake.

    SNOOPY

    discl: hold PGW
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  9. #519
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    Thanks Snoopy. The way I read it, I assumed that some of PGW's borrowings must be with Marac. Good to know that is not the case or behind the need for separation.

  10. #520
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    Default Norgate: Face in the mud?

    Quote Originally Posted by Snoopy View Post
    I wouldn't bet on the deal not going ahead. Norgate sounded pretty determined to get the deal done in some form. He used the phrase 'our word is our bond' when speaking on behalf of the board. If Norgate doesn't make the deal, then his deal making reputation will be in tatters. So I think provided the deal can be done using the overseas financiers, this Silver Fern Meats deal *will* go through.
    Two surprises here:

    -----

    3 November 2008

    Silver Fern Farms/PGW Partnership Agreement Terminated

    Silver Fern Farms Limited advises that PGG Wrightson Limited's (PGW) failure to pay the first instalment of $145 million for Silver Fern Farms shares in terms of the partnership proposal agreed between the two companies, has left Silver Fern Farms with no alternative but to terminate the agreement relating to the proposal.

    This follows continuous discussions and the inability by PGW to deliver any level of certainty as to a possible settlement date over an adequate period of time, following the settlement default on 1 October 2008.

    Silver Fern Farms' Chief Executive Keith Cooper said: "Termination of the agreement was a necessary step to provide certainty to our shareholders and other stakeholders including employees and suppliers. It enables us to move on and see whether any alternative arrangements between Silver Fern Farms and PGW are feasible. We have not determined the amount or form of compensation we will seek to recover from PGW. We expect that if any alternative arrangement is agreed and implemented, then this issue will be addressed as part of those arrangements."

    Mr Cooper said Silver Fern Farms' focus remained on making a difference to the future strategy and structure of the NZ red meat industry, with the ultimate aim of improving long term farmer returns. "Aggregation within the wider meat industry, in combination with integrating the supply chain, remains fundamental to achieving that outcome.

    "Whilst the merits and value of the transaction in terms of synergies, supply chain management and capital for Silver Fern Farms were significant and unchallengeable, enabling us to expedite our strategy, Silver Fern Farms future is not dependant on the transaction" he said.

    ------

    The first surprise is that Silver Fern has pulled the plug. What a curious thing to do to a 'good faith' partner. Does this mean there is an alternative deal with some other third party on the table? I am also curious that Silver Fern would consider seeking compensation from Norgate, when it is *they* who have pulled out- not him!

    The second surprise is that there is not a fixed compensation clause laid down in the existing agreement should it fail.

    The other point I note about the press release is that it is rather aggressive in note, yet conciliatory towards PGW in the sense that they are willing to look at an alternative ongoing relationship. IIRC the Grant Samual Report suggested that Norgate's offer was on the generous side of acceptable. Are Silver Fern trying to broker an even more attractive deal - for them? What will Norgate do now? *Can* Norgate do anything, or has the credit crisis permanently cropped his ambitions?

    SNOOPY

    discl: hold PGW
    Last edited by Snoopy; 03-11-2008 at 01:51 PM.
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