Liquidation of Central Otago grape-growing business a ‘very difficult decision’: director

Uncertainty around sales and a significant downturn in the market culminated in the “very difficult decision” to place a Central Otago grape-growing business into liquidation, its director says. Mount Dunstan Estates Ltd and its associated company, Mount Dunstan Harvesting Ltd, were both placed into liquidation by shareholder resolution late last month. The former traded as Mount Dunstan Estates, a 56ha Pinot Noir vineyard in Alexandra. The liquidator’s first report estimated that company alone had liabilities including $560,000 to secured creditors and $12,000 in preferential employee claims. Rory McLellan, a director of both companies, said it was a “very difficult decision” to place both companies into liquidation. Liquidation did not necessarily mean everything associated with the companies was unsuccessful, Mr McLellan said. Considerable work had been undertaken by shareholders, directors and staff over the years. “Unfortunately, the commercial environment changed and, at the same time, shareholders’ individual objectives changed. “I hope the liquidation process results in creditors being paid to the greatest extent possible, provides certainty for those wishing to exit and allows those who wish to continue grape-growing to pursue that independently if they choose.” The businesses had been operating in an increasingly difficult commercial environment, Mr McLellan said. The downturn in the grape market was “significant” and put pressure on profitability and created uncertainty around future revenue and the ongoing financial position of the companies. Shareholders had considered a range of options for some time, including continuation, restructuring, an orderly wind-down and ultimately liquidation. His view was they needed to deal with the situation while there were still funds and assets available to do so responsibly, rather than continue operating and potentially find themselves “in a considerably more difficult financial position later in the season”. “Once it became apparent that shareholders had fundamentally different objectives for the future, I believed an independent process was the most appropriate way of protecting everyone’s interests and bringing certainty to the situation.” The difficulty of the market was not simply the price of grapes. There was uncertainty about demand, the ability to secure purchasers and the volumes of fruit buyers were prepared to commit to. “The recent selling seasons made it clear to me that historical expectations around demand and revenue could no longer be relied upon when making decisions about future expenditure.” Asked if he was confident the companies’ debt could be paid off, Mr McLellan said that was a matter for the liquidator to determine. It was encouraging the first report identified potential for most, if not all, creditors to be paid, but the final outcome would depend on the values ultimately achieved on the companies’ assets, he said. The first report also cited “differing views of shareholders” as a reason for the liquidations. Asked about this, Mr McLellan said he would instead characterise it as “different aspirations”, rather than a personal dispute. Over time, and particularly as market conditions worsened, shareholders developed different objectives, he said. “Some wished to remain grape growers and believed there was a viable future for a smaller or restructured operation.” Others, himself included, wished to exit the businesses and have the freedom to determine the future use of their own land. The challenge was finding a structure that allowed one group to continue without requiring those wishing to exit to continue carrying financial or commercial obligations indefinitely, Mr McLellan said. “Ultimately, liquidation provided an independent mechanism for working through the companies’ assets, liabilities and obligations rather than attempting to resolve increasingly complex issues informally between shareholders.” He also acknowledged staff, who had worked hard through a particularly uncertain period and deserved recognition for the contribution they had made to the businesses, he said. tim.scott@odt.co.nz