Meat Board surmounts financial hurdle

Press, 9 July 1983, Page 13

Meat Board surmounts financial hurdle

PA Wellington The Meat Board is over its peak demand for money, with a little to spare. At the height of the killing season the board spent as much as 540 million a week in pay-outs to meat processors, and in freight and running costs.

It enters the slowdown in killing with $l5 million left of more than $640 million (at current exchange rates) in overseas loan facilities arranged before the season.

The board has also drawn heavily on the $lOO million that New Zealand trading banks have lent it, partly from funds which in the past might have been used by private meat exporters

before the board assumed control of export sheepmeat last year. It also drew $6 million from its $5O million promissory note facility, but the Kiwi Savings Stock issue until now had kept commercial bill rates so high that it was uneconomic to seek further promissory issues. Substantial Reserve Bank credit has also been extended to the board through the meat income stabilisation account, from which it traditionally draws trading finance.

Several months ago it was indicated that the debt with the Reserve Bank stood at almost $4O million, on which the board pays 1

per cent interest. It is this Reserve Bank account which indicates the board’s losses and profits over previous years. Its $64.6 million trading loss last season is measured as a debt to the stabilisation account. What has saved the board during the period of high interest rates, low liquidity, and already high borrowing overseas has been the support of an unnamed corporate benefactor and a major financial institution. Interest rates on this money have been lower than the commercial bill rate. The latter has been well beyond 17 per cent in recent weeks and is only

now starting to fall. Now that the board, in its first year as owner of all export sheepmeat, is over the hurdle of its huge cash demand, it can work at repaying its overseas debt. Repayments on this money are made direct from sales in overseas markets. The money does not pass through New Zealand, thus avoiding exchange-rate losses here. Most overseas borrowings are long-term facilities which roll over as the board makes repayments and can then draw more. The board’s debt to lenders other than the Reserve Bank is now well beyond $790 million.