Board of Agrowill Group to propose shareholders to vote in favour of restructuring
At a shareholder meeting to be held on 2 July, the Board of Lithuanian agricultural company Agrowill Group will propose the shareholders of Agrowill Group to vote in favour of the company’s restructuring. In the opinion of the Board, restructuring is currently the most acceptable way to continue the company’s activities under the current economic conditions.
It is proposed to restructure the company in the wake of short-term cash flow difficulties experienced by the Group and in an effort to retain all the available production facilities and assets.
If restructuring was chosen, the company’s creditors, bond holders and shareholders would be able to recover their investments and further develop their business. This would enable the company to avoid bankruptcy and all related negative consequences.
According to Mindaugas Juozaitis, a member of the Board and General Manager of Agrowill Group, the process of restructuring is beneficial to businesses that have a regular stable cash flow but encounter temporary financial difficulties. The purpose of this process is to retain all assets of the company, survive a slump in production prices and further develop the company’s activities rather than liquidate it.
Upon the start of the process of restructuring, economic and commercial activities are not terminated, but it becomes possible to regulate cash flows, pay debts, restore the company’s solvency and further develop the company’s activities. If a majority of creditors approve the restructuring plan, the process may last up to 4 years with a possibility to extent it for another year. Over this period, the company can not only recover and pay its creditors but also become profitable again.
According to Juozaitis, the process of restructuring will enable the company’s employees to keep their workplaces and incomes. It also creates preconditions for the company’s creditors and bond holders to recover debts. This process will enable shareholders to retain the value of the company and, at the same time, their investments, while the state will continue to receive budget revenue.
The start and process of restructuring depends on the company’s creditors: consent from a majority of creditors is required both at the start of restructuring procedures (when approving an outline of restructuring) and in the process of restructuring (when approving a detailed restructuring plan). The presented outline of restructuring provides arguments as to why it is worth facilitating further development of activities and why creditors should satisfy all of their claims on money somewhat later rather than satisfy part of the claims now.
The restructuring of Agrowill Group is an optimum solution both for creditors and shareholders, who will retain their equity.
These arguments are expected to help the company’s shareholders to make up their mind and actively participate in the meeting to be held on 2 July as well as approve the company’s restructuring.
“The present downturn in the economy and agricultural business means that agricultural activities creating basic consumer goods should soon bring a profit. The market will soon be short of milk and milk products and therefore production prices are likely to go up. We believe that Agrowill Group, as one of the largest agricultural companies in the EU, must take advantage of economies of scale and expect value added from the efficiency of production and purchasing power in view of sales volumes,” Juozaitis said.
In his opinion, agricultural production prices should start growing in 2010.
According to the General Manager of Agrowill Group, the company has increasingly efficient production facilities and assets required for the performance of the main activities of companies. The introduced changes in corporate activities have already produced results: both output volumes and positive cash flows from the main activities of Agrowill Group have increased. This year, the efficiency of activities of Agrowill Group should increase by some 20% more.
In Juozaitis’ opinion, even if a buyer of the managed land portfolio is not found, owing to effective primary agricultural production activities, Agrowill Group should be able to earn and accumulate sufficient funds during the restructuring period to cover all financial liabilities.
Agrowill Group currently has a herd of some 5,000 dairy cows and controls 23,000 ha of land. The Group employs some 600 people.
According to preliminary unaudited data, Agrowill Group has approximately LTL 360 million worth of assets and some LTL 253 million worth of liabilities.