PGW - PGG Wrightson

[beacon]

Gidday Enumerate
46,764,868/758,440,543 = about a sixteenth or 6%

I emailed the trustee asking for my allocation to then file in the bottom drawer

Brilliant idea. There's an SSH notice today re progress on that 6.17%

Despite the current european unrest affecting global markets as well as the consistent pressure RPI and related holdings overhang has had on the PGW share price, it has held up well. That's as bullish a sign as I've seen. Watching and accumulating ...

[biker]

It would seem to me this latest fiasco is simply reinforcing how basically incompetent the Wrightson Chairman and Board have been over the last few years. Keith Smith, Craig Norgate, McConnon etc. Perfect financial storm? Bullsh it. Rather an inability to do the job. Gross incompetence. SFF a prime example. And they know it, and admitted it at the AGM. I thought Norgate was a bit of a whiz kid. Plenty of arrogance and financial agression but an obvious and dissapointing lack of ability. The Fonterra Board must have wry smiles, having booted him out of the CEO position.
And how on earth did the McConnon family get sucked in to loosing $60million dollars?
Company Directors in good old NZ, they're a wonderful thing.

[Snoopy]

And how on earth did the McConnon family get sucked in to loosing $60million dollars?

$60m is the sum owed to bondholders. To my knowledge the McConnon's didn't own any bonds. The McConnon's have lost their equity in RPI. However, this equity was smoke and mirrors anyway. If you follow the accounting cross company paper trail it never existed. Thus the McConnon's have lost nothing in this collapse as I see it.

SNOOPY

[biker]

$60m is the sum owed to bondholders. To my knowledge the McConnon's didn't own any bonds. The McConnon's have lost their equity in RPI. However, this equity was smoke and mirrors anyway. If you follow the accounting cross company paper trail it never existed. Thus the McConnon's have lost nothing in this collapse as I see it.

SNOOPY

It was the equity in RPI I was refering to. However the words used at one of the AGM's by McConnon was " we've lost a shi t load "
( it is the agrarian sector after all! )

[biker]

Snoopy, I would be interested in supporting info showing the McConnons haven't lost anything.


Brian Gaynor and Owen Hembry in the Herald seem to have it pretty right. Both good articles IMHO

.............................However Norgate has been quoted as saying he hasn't lost anything so he may have had an undisclosed put option to the McConnon family whereby they have been forced to take the $60 million of shareholder losses associated Rural Portfolio Investments with public investors taking an additional $30 million hit.

Nearly $1.0 billion of investor wealth in PGG Wrightson, NZ Farming Systems Uruguay and Rural Portfolio Investments has been destroyed since mid-2008.

These huge losses should not have occurred because Norgate and the McConnon family are experienced business people with good track records. However they repeated the same mistakes as many other New Zealand entrepreneurs, namely they expanded far too rapidly with too much debt and not enough equity.

In addition they had weak boards of directors, they expanded NZ Farming Systems Uruguay far more rapidly than indicated in the prospectus, there were too many related party transactions and the Rural Portfolio redeemable preference shares should never have been sold to the public.

Wealth creation shouldn't be too difficult, particularly in a long-established rural-based company, but our business leaders continue to shoot themselves - and outside investors - in the foot through complex corporate structures, having too much debt and a reluctance to appoint strong independent directors.

* Disclosure of interests; Brian Gaynor is an executive director of Milford Asset Management.



And this from an article by Owen Hembry in the Herald


.........It is estimated nearly $1 billion of investor wealth has been wiped out in the past two years in rural companies associated with Norgate, with one key business partner losing more than $60 million


.......................The McConnons provided the initial $40 million investment in the Rural Portfolio group, followed by more capital to a total of $60.2 million - an investment now lost.

[Snoopy]

Snoopy, I would be interested in supporting info showing the McConnons haven't lost anything.
.......................The McConnons provided the initial $40 million investment in the Rural Portfolio group, followed by more capital to a total of $60.2 million - an investment now lost.

Look at the RPI prospectus issued in 2004. The structure of the group is on pg16 and the cashflow statement (before and after bond issue) on page 19. That $40m figure put in by the McConnon's is right. However that 'capital' was shown on page 69 of the RPI prospectus to be preference shares, a form of debt. I believe this was pulled out of the company when the RPI bonds were issued as replacement debt, leaving control of RPI with the McConnons and Norgate, but all the risk with the bondholders.

SNOOPY

[Snoopy]

I believe this was pulled out of the company when the RPI bonds were issued as replacement debt, leaving control of RPI with the McConnons and Norgate, but all the risk with the bondholders.

More specifically look at p19 column 3 the cashflow of Rural Portfolio Investment securities 12 months +18 days to 18 April 2005 (projected). That shows $85m of Redeemable Preference shares to be issued (to the public) and at the same time an $85m loan made to RPI being repaid. That to me is documentary evidence of of the McConnon's, Norgate and the banks cashing out and being replaced by the public bondholders as sole financers of the RPI holding company.

SNOOPY

[Snoopy]

It was the equity in RPI I was refering to. However the words used at one of the AGM's by McConnon was " we've lost a shi t load "
( it is the agrarian sector after all! )

There has been no public AGM of RPI, because this company is solely owned by the McConnons and Norgate with no public shareholders.

The expression " we've lost a shi t load " I assume was referring to share price declines of either or both of PGW and NZS and must have been made at a PGW or NZS shareholders meeting. In that sense I think the " we've lost a shi t load " is using 'we' in the 'royal we' sense. McConnon's baby RPI may have then been stareing at large on paper losses (which the receivers will realise). But when the baby 'died', it was simply handed onto the receivers. Any Norgate/ McConnon grief is for loss of control, not loss of cash.

SNOOPY

[Snoopy]

Any Norgate/ McConnon grief is for loss of control, not loss of cash.

My version of events would explain why Norgate is on record saying he has lost no cash. The alternative explanation, that Norgate had a secret put option to shovel debt onto the McConnons doesn't sound likely to me. Why would the McConnon's, experienced business people, have agreed to such a put option in the first place? What would be in it for them?

SNOOPY

[biker]

Thanks Snoopy.
Why dont you send your info to Gaynor etc and the Herald or better still, Stuff. It would make an interesting story.
The 'shi t load' comment was at the PGW AGM and that post was meant to be a light-weight reflection of the character of the man, with a comment like that at an AGM.
Irrespective of the amount lost, there can be no price put on the loss of reputation and 'face' by the McConnon family and Craig Norgate.
They are now simply additions to a sadly rapidly growing list.

Company Directors in good old NZ, they're a wonderful thing.