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NEWS FLASH: Wrightson unable to settle Silver Fern deal

Wednesday 1st October 2008

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PGG Wrightson, New Zealand's biggest rural services company, said it is unable to settle the NZ$220 million acquisition of a half stake in Silver Fern Farms because of the global credit squeeze.

Chairman Craig Norgate said a number of banks which had committed to participate in funding the transaction "had since been unable to finalise their credit approvals" in time for the part-settlement of the transaction by yesterday's deadline.

"It is unfortunate that market conditions preclude settlement today, and we will revisit the matter with all parties and endeavour to resolve it as quickly as possible," Norgate said in a statement.

The delay may mark the first major transaction by a New Zealand company thwarted by the global credit crunch, which has frozen the flow of funds between banks amid corporate failures, fire-sale takeovers and government bailouts in the US and Europe. US lawmakers have vowed to salvage the Treasury's US$700 billion package to buy up toxic mortgage related assets and help ease the liquidity squeeze.

Wrightson was to have made the first NZ$145 million payment towards the purchase yesterday. Instead, Silver Fern issued a brief statement saying the settlement wouldn't be completed on time. The second payment of NZ$75 million is due by March 2009.

"This is entirely a function of the extreme financial market conditions and their impact on banks' lending capacity in the current environment," Norgate said. He said the delay in settlement is like to be "weeks rather than days."

The delay means Wrightson had to cancel its NZ$78 million sale of shares to institutions and won't offer the same terms to retail investors to raise a further NZ$32 million as had been planned. An instituional placement may be necessary at a later date, it said.

By Jonathan Underhill

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