PGG Wrightson may not see all the $10 million loan it made to Wool Grower Holdings, the farmer-owned company it formed a joint venture with to create strong wool marketing company Wool Partners International.
It appears Wool Grower Holdings may be liquidated and the proceeds used to settle the loan, but its revalued assets may not be enough to cover its debt.
Much has changed since the original proposal to create Wool Partners International, a corporate-co-operative structure to market strong wool, with the announcement last week of a replacement 100% farmer-owned co-operative, Wool Partners Co-operative (WPC).
Under this latest proposal, strong wool growers are being invited to invest $1 for every kilogram of wool they produce in five 20c-a-year instalments.
WPC needs 50% of New Zealand's strong wool clip committed to it for it to proceed, and if that threshold is met, it is proposed that $17.7 million be used to buy assets from Wool Partners International - jointly owned by Wool Grower Holdings and PGG Wrightson.
WPC chairman Jeff Grant, who talked about the co-operative's prospectus to about 50 growers in Balclutha yesterday, said those assets had been independently revalued and PGG Wrightson had accepted that the valuations had fallen since the original deal.
Mr Grant and a spokesman for PGG Wrightson both said a final decision on settling the loan was up to the boards of Wool Grower Holdings and PGG Wrightson.
The support of PGG Wrightson was crucial in creating a new structure to turn the ailing export strong wool industry around, Mr Grant said.
The WPC prospectus specifically excludes any losses or liabilities being transferred from the original arrangement. to the new co-operative.
Yesterday's meeting promoting the WPC prospectus, one of 100 being held nationally, was relatively subdued.
Waihola farmer John Galloway was disappointed merger talks between WPI and Elders Primary Wool failed.
He warned that the wool industry could follow the meat industry and be damaged by competition.
"It seems a folly to me to have two co-operatives competing in the same market."
Others asked for detail about how the proposed company would work, including how it would boost returns to growers.
Mr Grant said returns would be boosted by creating demand and therefore lifting prices, and from royalties paid by users of WPC's Laneve brand, which could be as much as $2 a kg.
