Anger over SunRice vote

Peter Hemphill |  June 8, 2011


A NUMBER of current rice growers and retired farmers walked away from last week's SunRice vote.
They say they were angry that they were unaware of the company's debt problem prior to the takeover bid by Ebro Foods.
SunRice chairman Gerry Lawson made it clear at the Jerilderie meeting that the company was hopelessly in debt, and the only way out was to sell to Ebro Foods.
Lawyer Adam Bisits, who represented a number of growers at the meeting, said SunRice had given glowing reports of its financial position during the past two years, until the Ebro bid came forward.
Mr Bisits said a 2009 report pointed out the company was well within its debt covenants.
The booklet sent to growers providing information relating to the scheme of arrangement for the Ebro deal detailed how the debt evolved.
SunRice's debt has averaged about $220 million during the six years to 2005-06, made up of short-term seasonal debt to banks - with a tenure of one year - longer-term core debt, provided by banks and rice bonds funded by growers.
The seasonal debt is used to pay growers for their rice but also to provide cash flow for running the business.
The core debt is usually used for capital expenditure and repayment of grower debt.
During the past 10 years, storage sheds were owned by the Rice Marketing Board, with funding provided by growers through RMB equity.
In 2006, SunRice decided to buy the sheds through a company called Australian Grain Storage Pty Ltd.
Both SunRice and subsidiary AGS then borrowed from the banks to pay RMB for the sheds, which, in turn, repaid growers. In essence, the debt from building the sheds was transferred from growers to SunRice.
SunRice hoped holders of the rice bonds and RMB equity would convert their funds into B-class shares in the company, reducing the amount it needed to borrow from banks.
But drought meant there was little conversion by the cash-strapped farmers. SunRice's debt jumped to $382 million when the company took ownership of the storage sheds.
The company said drought had had an impact on its ability to repay the debt.
In 2008-09, SunRice made an extraordinary $76.8 million profit despite marketing an unusually small rice crop of 65,922 tonnes.
The success was based on sourcing, processing and shipping rice from around the world for its overseas markets.
The profit allowed the company to reduce its debt to $308 million by April last year.
The debt is now less than what it was before SunRice bought the storage sheds, but about $80 million higher than historic averages