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Rural Portfolio Capital breaches deed as dividend escrow account empties

Friday 16th April 2010

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Rural Portfolio Capital, a unit of Baird McConnon and Craig Norgate’s investment company, has breached the terms of its Security Trust Deed after making its six-monthly dividend payment yesterday.

The payment on its $60 million of redeemable preference shares drained the funds from the company’s Dividend Escrow Account, which is required to at all times hold enough to meet its next obligation, in this case the dividend due on Oct. 15. Under the deed, it has 30 days to remedy the breach.

“The RPI Group expects to complete arrangements to top up of the Dividend Escrow Account within the remedy period,” it said in a statement. “An extension of time has been sought from the New Zealand financial institutions with existing borrowings to the RPI Group, to allow all arrangements for those borrowings to be concluded."

The company sold the April 2011 preference shares in 2007.

In the period ended December 31, parent Rural Portfolio Investments reported breaches of covenants relating to asset cover and earnings, restricting the company from issuing further debt, according to its interim report.

The income covenant breach followed the lack of dividend from PGG Wrightson. Rural Portfolio’s holding in Wrightson was watered down to about 13% from 27% following Wrightson’s rights issue last year, in which RPI didn’t participate. 

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