The rapidly declining exchange rate has caused Silver Fern Farms to breach a banking covenant with its shareholders' funds, but the meat co-operative said the business was not affected.
The meat exporter announced to the New Zealand Stock Exchange yesterday that the rapid decline in the exchange rate against the United States dollar meant it was not complying with its banking covenants.
Chairman Eoin Garden said in an interview the breach would not threaten the business, but the disclosure was part of the requirement of its bonds issue.
The bonds were not affected.
"It's not a business threatening event. It is a technical event, created by abnormal conditions."
Mr Garden said Silver Fern Farms (SFF) had its usual 12-month exchange rate hedging policy in place, but the breach occurred because the rapid fall in the dollar had put pressure on shareholders' funds.
SFF had advised its banks it was not complying with its minimum shareholders' funds covenant and had requested a waiver, which its banks were considering, along with a review of the covenant to accommodate the volatility.
"These are unprecedented times and we are finding the risk management policy, in terms of hedging, cannot cope with this sort of volatility."
All exporters would be feeling the same pressure, but he said shareholders' funds would return to normal levels later in the season.
Accentuating the pressure was the higher than expected early season kill.
