The new funding provides the company, which manufactures a biological control to combat the grape-wasting fungus botrytis cinerea, with the $1.3 million in capital shareholders earlier this year refused to provide.
It should also allow the company to address recent manufacturing hitches with its flagship BOTRY-Zen product.
In an announcement to the New Zealand Stock Exchange yesterday, Botry Zen chairman Max Shepherd said the Bank of New Zealand had agreed to a new loan overdraft facility of $1.2 million which will terminate on April 30.
As at March 31, Botry Zen had an overdraft just under $1 million.
Melic Innovators, previously the Mosgiel food producers Bush Road Ltd, has agreed to loan the company $500,000 for three years on terms which mirror the interest payable on the overdraft facility.
The company would also subscribe for 25 million ordinary shares at an issue price of 2c, which would provide another $500,000, representing 12% of Botry Zen's issued capital.
In addition, Dr Shepherd said it was in discussions with another "unrelated party" to subscribe for 10 million ordinary shares at 2c a share, with an announcement on the outcome of those discussions expected this week.
ABN Amro Craigs adviser Peter McIntyre said Botry Zen had been able to recapitalise through a "white knight" giving it time to sort out its production difficulties and to get its business back on track.
"They've found a white knight in the form of Melic. It's enough to bide them time to work through their production facilities and to get through this difficult period."
Botry Zen said it needed $1.3 million in capital to address its production issues, and after shareholders rejected a request for $1.8 million in extra capital through capital notes, directors said they faced a funding crisis which could see the business sold.
Dr Shepherd could not be reached to determine if selling was still being contemplated.
He said in a statement the company was overcoming BOTRY-Zen production issues.
"The most recent production results have produced improved levels of BOTRY-Zen, but it may be premature to conclude that the recent difficulties will not recur."
In the meantime, production of ARMOUR-Zen, a late-season control agent against botrytis cinerea, has been delayed by the finance difficulties, but Dr Shepherd said production would now re-commence.
Dr Shepherd also said that Pricewaterhouse Coopers was no longer providing advice to the company on options to solve its financial issues.
