Sharechat Logo

Talley's, Olam commit $40.3 mln in Open Country rights issue

Monday 5th March 2012 1 Comment

Text too small?

Open Country Dairy’s controlling shareholders, Talley’s Group and Olam International, will stump up $40.3 million in a rights issue aimed to cut the dairy processor’s debt as a loan repayment looms at the end of the month.

Privately-held food manufacturer Talley’s, whose interests range from frozen fish to ice cream, and Singaporean food commodities investor Olam have committed to a take up their full entitlements in a one-for-two pro rata non-renounceable rights issue, according to the dairy processor’s offer document. The offer to existing shareholders lets them buy one new share for every two they hold at $1 apiece, and is seeking to raise as much as $57.8 million.

“The proceeds of this offer will be used to reduce bank debt and to provide flexibility to move to a new farmer payment system that pays farmer earlier for Open Country Dairy’s milk supply,” chairman Laurie Margrain said in a letter to shareholders.

Open Country cites lower debt as “important given the volatile commodity markets in which it operates” and flags its bank facility as a specific investor risk.

The cash raised and company earnings will be used to repay $45 million of term debt due by the end of the month. The total facility expires on Oct. 31.

The offer comes after Open Country more-than-tripled its loss to $29.5 million in the 12 months ended July 31 last year as surging milk prices and a strong kiwi dollar sapped earnings. The dairy processor was forced to seek a waiver from lender Bank of New Zealand after it missed banking covenants relating to stock, debt cover and minimum equity.

“Open Country Dairy is comfortable that it will be able to comply with its covenants following the receipt of proceeds of the offer, and that it will be able to secure a suitable replacement banking facility when the existing facility expires,” the company said.

If the dairy processor breaches bank covenants, or isn’t able to tap new funding lines, “this would lead to an exploration of other funding and strategic options,” including “equity raising, shareholder loans, or in an extreme case asset sales, receivership or voluntary administration.”

Open Country said it is unsure when it might start paying dividends, and isn’t planning on making a shareholder return this financial year.

Singapore-based Olam was granted a waiver from the Takeovers Code to participate in the rights issue, and will also need approval from the Overseas Investment Office to participate as its stake might increase above 25 percent.

The offer closes on March 14 and new shares will be allotted on March 20.

  General Finance Advertising    

Comments from our readers

On 12 March 2012 at 4:45 pm Anonymous said:
In its last financial year Open Country Dairy spent more on buying milk than it earned from selling processed dairy products. How could this company survive? Would it come back next yare for another rights issue if it makes aanother loss in 2011/12 year?
Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar stalls after Bascand's rate cut comments
Bascand says RBNZ will consider changing bank capital proposals
Affordable electricity key to decarbonisation - Genesis
Graeme Hart trims global packaging empire with US$615m asset sale
Stronger-than-expected inflation won't deter November rate cut - economists
Contact in talks on 13MW dairy boiler project
Restaurant Brands forecasts 10% growth in FY2020
Domestic inflation rises at fastest annual pace in eight years
16th October 2019 Morning Report
NZ dollar falls against British pound on Brexit hopes, CPI in focus

IRG See IRG research reports