PGW - PGG Wrightson

**beacon** · 15-02-2009, 12:16 PM

pgc in bit of hot water due to marac loans to developers...

**Dr_Who** · 17-02-2009, 10:48 AM

You guys think PGW will need to do a rights issue to raise capital for debt reduction?

**Snoopy** · 17-02-2009, 01:41 PM

Originally Posted by Dr_Who

You guys think PGW will need to do a rights issue to raise capital for debt reduction?

If they do, then Craig Norgates Rural Portfolio Investments won't be able to pay. My guess is no rights issue. I'm guessing that if they go this way they will place a block of shares with a cornerstone shareholder, then have a non-renouncable $5k offer to existing shareholders. IOW a mirror of the Silver Fern Farms deal in the way it would be structured.

SNOOPY

**Dr_Who** · 17-02-2009, 02:35 PM

Originally Posted by Snoopy

then have a non-renouncable $5k offer to existing shareholders. IOW a mirror of the Silver Fern Farms deal in the way it would be structured.

SNOOPY

Snoopy

Please explain further in detail.

I guess I am abit slow today with the hot weather.

Cheers
Doc

**Snoopy** · 17-02-2009, 08:45 PM

Originally Posted by Dr_Who

Snoopy

Please explain further in detail.

I guess I am abit slow today with the hot weather.

Cheers
Doc

The new capital in the proposed SFF/PGW joint venture was effectively coming from the banks that Craig Norgate thought he had lined up before the credit crunch bit. As a sop to existing PGW shareholders, and to keep the balance sheet more respectable, the plan was to offer up to $5,000 worth of new PGW shares to every shareholder, regardless of how many shares they owned. That $5,000 offer was not renouncable or tradeable. That in turn meant that Norgate via Rural Portfolio Investments (RPI) only needed to front up with around $5,000 to be seen to be supporting the share issue, despite owning around 25% of the company. The net result of it all was that Norgate was looking to raise a significant amount of cash from PGW shareholders, without putting huge amounts of cash in via RPI.

This IMO will be the route Norgate will follow, with any future capital raising. It has to be this way because RPI is a house of cards that does not have the capacity to stump up large sums of cash.

SNOOPY

**Dr_Who** · 18-02-2009, 07:57 AM

Thanks Snoopy. This will be interesting to see. I will do more reading on the SFF/PGW proposal when I have time this weekend.

There is money to be made in PGW, but not sure which way, in long or short position.

**Snoopy** · 18-02-2009, 01:51 PM

Originally Posted by Dr_Who

Thanks Snoopy. This will be interesting to see. I will do more reading on the SFF/PGW proposal when I have time this weekend.

There is money to be made in PGW, but not sure which way, in long or short position.

You might have some interesting vitriol to read over the weekend Doc. I was very surprised at the extent of the spat between PGW and SFF that has broken out in the media today. SFF Chairman not happy and accusing PGW of negotiating a compensation deal through the media!

$10m has been put on the table in cash by PGW and rejected by SFF, even though actual costs incurred by SFF were $3.5m in pursuit of the merger. PGW wants mediation using an ex high court judge. SFF now claims PGW have lost most of their credibility because of this issue, and claims $10m compensation is grossly inadequate. I would have thought the credit crunch breaking out during the week agreements were going to be signed with overseas banks might have something to do with the agreement breaking down? How much of this is just staking out the starting ground before compensation negotiations begin I'm not sure. But it does seem that friendly relations will be difficult after this. Perhaps it was unwise for PGW to go to the media yesterday issuing a press release giving their view of the situation? Personally I think PGW did owe it to their shareholders to keep them fully and quantifiably informed.

SFF claiming that their farmer shareholders who voted overwhelmingly for the merger agreement some six months ago are now luke warm. Have these farmers gone mad or are higher lamb prices due to a declining currency luring them back to the boom bust cycle of thinking? Personally I would have thought an offer of $7m by PGW (double the actual loss) to SFF would have been more than adequate in current circumstances. Still it all explains the PGW share price weakness of the last couple of days.

SNOOPY

discl: hold PGW

**southernerx** · 18-02-2009, 02:31 PM

Damages in a breach of contract case are not just about cost recovery. PGW wooed SFF with some pretty substantial benefits that they were going to deliver through a merger, and those benefits were, if I recall correctly, disclosed as a lot more than $10m - per annum.