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Oyster Bay, heading for loss, seeks waiver for bank covenants

Thursday 15th April 2010

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Oyster Bay Marlborough Vineyards, the supply of grapes to Delegat’s Wine Estate, says weak prices of grapes will result in an operating loss this year, forcing the grower to seek a waiver from its banking covenants.

The announcement comes after reports that spot prices for sauvignon blanc grapes are at all-time lows, sinking to as little as $550 per tonne. Oyster Bay, whose grapes as turned into the export wines that bear its name, said it is still in talks with Delegat’s over prices for the current harvest.

“The supply imbalance of some varietals is having a negative impact on grape prices being offered by wineries,” chairman Sandy Maier said in a statement. “Based on likely harvest volumes and current market prices for grapes, it is anticipated that Oyster Bay will operate at a loss for the 2010 financial year.”

Shares of Oyster Bay, which sells its entire harvest to 50.1% owner Delegat’s, have sunk 9% in the past week. The price the grapes are sold at is negotiated by Oyster Bay’s independent directors. Delegat’s stock rose 0.5% to $1.86 yesterday and have tumbled 32% this year.

In February, Delegat’s forecast a cut in full-year earnings of 30% to 40% as it writes down its investment in vineyards amid an oversupply of grapes.

Directors of Oyster Bay “are in the process of seeking a waiver” from the company’s banks and will make a further announcement when appropriate, Maier said.

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