Rural Portfolio Investments, the private investment company of Craig Norgate and interests associated with the McConnon family, of Dunedin, needs to refinance its cash requirements before October 15, the company said yesterday.
The refinancing has been caused by the failure of PGG Wrightson, which is 27% owned by RPI, to pay a final dividend, the company said in a statement.
"The RPI Group sources a significant portion of its cash funds from the dividends from PGG Wrightson and this reduction in dividends will require the refinancing prior to October 15," the statement said.
The group would review refinancing strategies to arrange funding as required.
The funding might be sourced from further borrowings or a sale of available assets.
However, under the security trust deed, the 44.15 million PGG Wrightson shares and the 10 million NZ Farming Systems Uruguay shares were held as security for the redeemable preference shareholders of Rural Portfolio Capital and were not for sale.
PGG Wrightson said it would not pay a final dividend after last week reporting an annual loss of $66.4 million.
Craigs Investment Partners broker Chris Timms said many of the South Island's farm-associated companies were now tied in with each other.
RPI owns 27% of PGG Wrightson.
Pyne Gould Corporation, which owns 21% of PGG Wrightson, reported an annual loss of $54.4 million, while South Canterbury Finance, which extended a convertible loan to PGG Wrightson to help it settle its failed merger dispute with Silver Fern Farms, reported a loss on Friday of $69 million.
Silver Fern Farms received 10 million shares in PGG Wrightson as part settlement for the failed merger.
Raising extra money would not be easy but RPI could sell the PGG Wrightson shares not held in trust for the preference shareholders.
"One possible source of funds, like Allan Hubbard, of Southbury, is already well tapped for cash through his own companies," Mr Timms said.
The current PGG Wrightson share price of 70c made the company a takeover prospect for private equity funds or firms like Australian rural services company Elders which was cashed up after selling some assets.
Elders announced yesterday it would conduct a capital raising as part of refinancing and recapitalisation.
It requested a trading halt in its shares on the Australian stock exchange to allow that to take place.
The move comes as timber company Gunns Ltd announced it was acquiring the timber processing division of Elders subsidiary ITC Ltd for an enterprise value of $100 million.
Mr Norgate last month stood down as chairman of PGG Wrightson, saying the nation's largest rural services company, needed an independent leader for the next stage of its growth.
A year ago today, PGG Wrightson shares had a rolling-year average of $2.75, a far cry from yesterday's trading, Mr Timms said.
