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Norgate's RPI placed in receivership after running out of cash

Monday 3rd May 2010

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Rural Portfolio Investments, the investment vehicle of Baird McConnon and Craig Norgate, was placed in receivership by the trustee for holders of its $60 million of preference shares, which were suspended indefinitely today after the company said it had a cash shortfall.

Trustee Executors appointed Kerryn Downey and Andrew Grenfell from McGrathNicol as receivers. They will take control of 46.8 million PGG Wrightson shares, 10 million NZ Farming Systems Uruguay and $742,314 in its dividend escrow account, worth about $30 million in total.

The shortfall in the escrow account, which is required at all times to have enough to meet the next dividend payment, helped bring about the downfall of RPI, putting it in breach of its trust deed.

Further breaches were identified. Rural Portfolio defaulted on its obligations to investors, said Yogesh Mody, regional manager for Trustees Executors.

“Our focus is to ensure that as much value as possible is returned to investors, he said.

The investment company disclosed a shortfall of $1.45 million in its escrow account, which requires a total of $2.19 million be held for its Oct. 15 dividend payment.

Last week, Rural Portfolio Investments sold about half of its stake in Wrightson, 6.4%, or 48.5 million shares, for 56 cents apiece, raising $27 million, using the funds to repay debt.

Rural Portfolio was deprived of the cash flow it had depended on to meet dividend payments when Wrightson suspended its own dividends expected in October 2009 and this month.

At the same time, its holding in Wrightson was diluted by Wrightson’s placement and rights issue, which Rural Portfolio didn’t participate in.

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