MercoPress. South Atlantic News Agency

NZ dairy farming group in Uruguay raised 30 million USD locally

The money will be used to cover losses from the worst drought in 30 years.

NZ Farming Systems Uruguay Ltd has raised 30 million US dollars by selling a first tranche of bonds in Uruguay. The non-convertible bonds have an expected maturity of about 15 years, and pay a fixed interest rate of 5% until September 30, 2010.

After that, they pay a variable interest rate of between 5% and 15% calculated using a formula incorporating gross milk revenue and certain key input costs. The bonds have an interest-only period until March 30, 2016. Repayments of principal, linked to gross milk revenue, occur after that.

The money raised will be used to develop dairy production on the company's farms in Uruguay, including further irrigation and milking sheds.

NZFSU, which uses its New Zealand dairying expertise on farms in Uruguay, has forecast an annual loss after the worst droughts in 30 years hit the country. The company - in which big rural servicing company PGG Wrightson has an 11% stake - had signalled that it needed more capital by June, and if it did not raise the money it would have to sell some of its land.

The company raised 200 million US dollars in equity in 2006 and 2007 to develop dairy farms in Uruguay. Prior to the bond sale it had 16 million USD of funding from Uruguayan banks and a short-term facility of 1.5 million USD obtained recently.

The company plans to raise further debt for farm development. It has previously estimated that finishing the conversion of its landholding to dairy production would require up to 90 million USD.

The bond offer was over-subscribed with 47.7 million USD of bids received. The 30 million USD of bonds will be issued at an average price of 99.28% of face value.

“We are now very pleased to successfully conclude this first tranche,” said chairman Keith Smith. “The bond issue has had extremely strong support from Uruguayan investors, in the context of a difficult credit environment globally” he said.

The NZFSU farms are located in the provinces of Rio Negro, Florida, Lavalleja and Rocha, in the west, south and south-east of Uruguay.