NZWC calls for review as loan terms breached

One of New Zealand's large wine makers wants bankers to hold an independent review of its finances and business model, after a significant breach of its loan terms.

The New Zealand Wine Company (NZWC), which owns brands including Grove Mill and Sanctuary, warned the NZX last night that it would be in breach of its loan agreement with ANZ, which stipulates that its underlying earnings must be at least 1.3 times its interest costs.

Renwick-based NZWC, which had revenues of more than $13 million last year, said it would miss the condition by a "significant" margin.

ANZ has waived the breach on the condition of an independent review of its forecasts and business model. However, if the bank is not satisfied it could call in its loan facilities.

Chairman Alton Jamieson said the industry was struggling against an oversupply dampening prices, while the kiwi dollar was trading near 30-year highs against the US dollar and the British pound, two of its big export markets.

"The combination of those two things makes life very difficult," Mr Jamieson said, adding that if the dollar fell back to the 10-year average against the US and British currencies "there wouldn't be a problem".

Mr Jamieson said he was confident NZWC would get through the review, adding that he knew of private wine companies in a similar position, but as a listed company it was required to reveal the breach under continuous disclosure rules.

"We know that others are carrying out these negotiations with banks, other wine companies, but of course they don't have to disclose."

Wine prices have been hit by a big rise in grape harvests in recent years.

This month, industry body New Zealand Winegrowers revealed that 324,591 tonnes of grapes were harvested in the 2011 season, a 23 per cent increase on 2010 and about 14,000 tonnes more than expected.

Mr Jamieson said the industry needed to get supply and demand back into balance quickly.

"Collectively growers and wine makers have to fine a solution, otherwise there'll be more banks taking control."

In the six months to December 31, NZWC reported underlying earnings of $291,000, with net interest costs of $388,000.