Rural Portfolio, facing cash shortfall, halts preference shares pending statement

Monday 3rd May 2010

Rural Portfolio Capital, the investment vehicle of Baird McConnon and Craig Norgate, halted trading in its $60 million of preference shares after announcing on Friday that it had run short of cash.

RPI has made a proposal to Trustees Executors Ltd., the trustee for investors, that it believes would result in the “quick and cost effective” solution, it said on Friday. It gave no details in its statement, saying preference shareholders would be advised “of the actions taken by the Trustee at the appropriate time.”

The investment company has been unable to top up its dividend escrow account as required after it was emptied to make the last payment to investors. It said the shortfall is $1.45 million. The account is required to always hold enough for the next payment, in this case on Oct. 15, of $2.19 million.

Under the Security Trust Deed, Rural Portfolio had 30 days from the April 16 breach.

The shortfall means Norgate and McConnon may have to put RPI’s remaining assets on the table - 46.8 million shares of PGG Wrightson, 10 million shares in NZ Farming Systems and $742,314 sitting in the escrow account, a group of assets with a market value of $29.6 million.

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.Wrightson shares dropped 5.4% to 53 cents on Friday and Farming Systems was unchanged at 41 cents.

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.

The value of Wrightson shares has tumbled 47% in the past 12 months, while Farming Systems dropped 32%.

Businesswire.co.nz

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