News round-up

Iconic Rural Property Trust shrinks, Geneva gets banker's backing.

Monday, April 6th 2009, 5:00AM

Rural Property Trust shrinks
New Zealand Rural Property Trust made a half-year operating loss of $1.6 million and indicated the value of its farm properties may have fallen by around $21 million and $23.5 million.

Major factors in operating losses were a 22% fall in milk income as dairy processor Fonterra cut its advance payments, plus a sharp rise in costs of fertilizer and supplementary feed.

Total milk payments fell to $1.68 million from $2.15 million. Livestock revenue rose to $476,000 from $299,000, but farm expenses jumped to $2.3 million from $1.45 million.

Chief executive Brian Burrough said the key issue is the tight cash flow. “We just have to hunker down and make sure our farms are operating as well as they can. It’s all about cash flow, not growth at the moment.”

The trust’s results is an indication of just how the farming industry’s fortunes have changed since the record profit result last year and the effect the economy is having on the sector.

Geneva's banking facility confirmed
Geneva Finance says that its banker (BOS) has re-affirmed the company's $35m funding line through to 30 April 2011. The facility remains subject to normal commercial covenants that have been accepted by the Geneva Board of directors.

Geneva paid debenture investors their third principal installment ($14.7m) plus interest at the end of last month. This repayment is part of its capital reconstruction plan.

The company has now repaid a total of $54.6m to all investors, comprising $46.2m of principal plus interest of around $8.4m, in the space of 11 months.

– At its inaugural meeting yesterday, members of the Investors Working Group (IWG) said that the current political and special interest pressures placed on the Financial Accounting Standards Board (FASB) to change fair value accounting standards are unacceptable and very troubling. The IWG added that they are concerned and dismayed by the lack of normal due process and the accelerated timeline for commenting on FASB’s proposals on “other than temporary impairment” issues and determining whether a market is distressed. In order to create high quality accounting standards, it is critical that the process be independent and free from political pressure. This will ensure that such standards are neutral and faithfully represent economic reality. To the extent that these new FASB proposals reduce the free flow of transparent and reliable financial information, they undermine investor interests and weaken their ability to make sound investment decisions. Moreover, when this process is rushed and potentially compromised, it leads to an increase in capital costs, erosion of investor confidence, and ultimately a disruption of markets. The IWG is an independent panel that will recommend ways to improve the regulation of the U.S. financial markets. This diverse, non-partisan panel of experts is co-sponsored by the Council of Institutional Investors and the CFA Institute Centre for Financial Market Integrity. It expects to issue an initial report and recommendations by May 2009. The IWG will ensure that investor views are heard as policymakers and financial market participants debate how to modernize the U.S. system of financial regulation. The IWG believes that the ongoing national discussion about regulatory reform has largely ignored investor considerations, focusing instead on containing costs for issuers and dealers in the U.S. capital markets.

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