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A restructure is imminent for the troubled South Pacific Fertilizer Ltd, with government revealing today that it will ease the company’s cost burden as well as have its debt owed to the Sugar Cane Growers Fund (SCGF) converted to equity.
Today’s Cabinet statement on this move stated that a government subsidy of $14.09 per bag of fertilizer sold by SPF was necessary in order to salvage the company’s desperate financial situation.
In his submission to Cabinet, Prime Minister and minister responsible for sugar Commodore Voreqe Bainimarama said that based on the grossly non-commercial trading terms on which SPFL has been operating, and despite Government’s grant contribution of $6.56 million, SPFL was expected to make a loss of $7.0 million for year ending 31 March 2009.
“SPFL has borrowed $14.0 million from the SCGF Growers to meet its financing requirements. In view of the SPFL’s current financial position and the expected cost of fertilizers in the immediate future, it is certainly not possible for SPFL to continue trading, and it would become insolvent if it continues to do so,” Bainimarama said in his submission.
He further explained that the SPFL will be restructured, with $14m of its loans from the SCGF to be converted into equity. This will be facilitated via an amendment to be made to the Sugar Cane Growers Fund Act.
In endorsing Bainimarama’s submission, Cabinet has agreed to an increase in fertilizer price from $19.50 per bag to $45.59 per bag.
The Government has agreed to fork out $14.09 per bag while growers are expected to meet $12 per bag of the $26.09 price increase.
