Investors in Rural Portfolio likely to claw back less than half of principal

Tuesday 25th May 2010

Investors in the Rural Portfolio group of companies, the failed investment vehicle of Craig Norgate and Baird McConnon, are likely to get less than half the principal they put into the company.

Receiver Kerryn Downey of McGrathNicol and Trustee Executors’ Yogesh Mody told investors they will get a 47 cent payment from the sale of RPC’s shares in PGG Wrightson and NZ Farming Systems Uruguay. Downey and Mody expect any further payments will be less than 1.25 cents.

The letter to investors defended the trustee’s decision not to distribute the company’s assets among investors, saying the Trust Deed didn’t specifically permit a distribution.

“In the trustee’s view, there appeared to be no investor consensus with respect to an asset distribution, hence the outcome of any meeting would be uncertain while the costs of the process would have been borne totally borne by the investors,” Downey’s and Mody’s letter said.

“Time, cost, and market risks were considered by the receivers and any perceived benefits to investors (given that the secured shares can be freely acquired on the NZX) did not justify the receivers taking an alternative approach of seeking court approval for an asset distribution to investors,” it said.

Rural Portfolio was sent to the receivers after it breached its trust deed when it was unable to top up its dividend escrow account as required after it was emptied to meet its last payment to investors.

It was deprived of the necessary cash flow after Wrightson suspended its own dividends in October last year and this month, while at the same time diluting investors’ holdings in a placement and rights issue, which Rural Portfolio didn’t participate in.

Since then, the company delisted its securities from the NZX and sold off its shareholdings in Wrightson and Farming Systems.

Trustee Executors is considering whether to take any further action to pursue Rural Portfolio over its unsecured guarantees for the full amount of the investment, which will rely on whether there’s a “realistic prospect of a return to the investors.”

It also raised the prospect of liquidating Rural Portfolio Capital and Rural Portfolio Investments.

Businesswire.co.nz

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