LOSS ON WOOLLEN MILLS

Poverty Bay Herald, Volume LV, Issue 17144, 28 December 1929, Page 14

LOSS ON WOOLLEN MILLS

WANGANUI COMPANY OPTION TO PURCHASE GIVEN SUM OF £55,000 FIXED The directors of tlie Wanganui Woollen Mills have signed an option giving the holder the right to purchase the mills as a going concern on .January Ml next for £55,000. This information was conveyed to a public meeting of Wanganui business men and shareholders. The identity of the optionholder was not disclosed. The meeting was convened by Mr. T. Warnoek, who said his object was to assist in the interests of Wanganui to keep the mills going. He suggested that the resuscitation of the mills should become a responsibility for the public to take up. Mr. E. P. Sea ley, manager of the Wanganui branch of the National Bank of New Zealand, detailed the action taken by the bank as dictated by the general manager. After the appearance of the balance-sheet of the company, as at June MO, 1928, the bank was dissatisfied with the position, which showed accumulated losses totalling approximately £40,000. MORE CAPITAL NEEDED

It was decided then to write off those losses and make allowances for machinery which had been purchased, and was unsuitable for requirements,' and to write the capital down by half. To keep its finger on the pulse of, operations the bank asked for regular statements from the mills showing the position from month to month. After the appearance of the balancesheet as at June MO, 1929. which revealed a working loss of £9822, the bank notified the directors that they would have to submit fresh proposals for a further guarantee of fresh capital lo cover the bank’s position. At that time Messrs. Macky, Logan and Caldwell, of Auckland, had made some proposal about taking the mills over. The bank asked for a guarantee and was prepared to carry on until it knew what the next balance-sheet would show. A G1 T AR A NTOIi WITHDRAWS Judging by the fortnightly statements which had been submitted since June M 0 last, Mr. Sealey said he believed, the mill was holding its own. The position had been further complicated. however, through one of the guarantors withdrawing his guarantee. The, communication he had from his general manager was to the effect that the bank was prepared to free the mill buildings, plant and land from the debenture conditional on £25,000 being raised to reduce the overdraft. To cover the balance of the overdraft it would require a joint and several to be taken on the' liquid assets, such as yarns and so forth, for £20,000. The margin of all assets over the bank overdraft amounted to £80,489. “As far as the directors arc concerned there is no doubt that they require more capital,’’ said Mr. Robert Lilburn, chairman of directors. “Whatever is done will have to be done quickly if wc arc to carry on. We have been presented with the position by the bank. Unless we can get more capital we will have to close. “ A VERY BAD BARGAIN’’ “We have either to give effect to the resolution passed authorising us to soli, the undertaking, or provide capital to satisfy the National Bank of New Zealand. We have explored fresh avenues from which capital might be provided, but have not been successful. Unless we can provide what is wanted the bank will insist on us signing an option. We know this option is a very bad bargain for the shareholders, but we have no alternative. Whatever we do must be done immediately. We require a £IO,OOO guarantee for the bank to carry on until the end of February. ’ ’ After further discussion the directors withdrew to discuss a phase of the problem that had not been made public,.and later they met a committee appointed by the meeting. Upon resuming it was reported that the committee was satisfied that there was nothing to do but sign the option, which was to be taken up by the end of January.

Wanganui Woollen Mills, Ltd., was formed after the war with an authorised capital of £200,000 in £1 shares. At June 30, 1928, £184,252 had been issued, paid up to £178,004. In September, 1928, a resolution was passed by the shareholders to reduce the authorised capital from £200,000 to £IOO,OOO by reducing the shares from £1 to 10s, and to write down the issued capital of £184,252 to £92,120. This made the paid-up capital £85,939, there being £OI7B calls unpaid. This resolution was confirmed, by order ol' the Supreme Court, in March last. The reduction of capital enabled the company to extinguish its establishment and preliminary expenses, £18,735, and the accumulated deficit of £39,171, leaving n balance of £34,219.