RFM buys out Gt Southern stake for $15m

Great Southern subsidiary Rural Funds Management has escaped the clutches of its failed parent, paying $15 million to buy out the collapsed agribusiness' 70 per cent stake.

In an agreement reached with the receiver McGrathNicol this week, management at RFM, a specialist agricultural fund manager with interests in poultry, wine and almonds, organised the payment of $15 million to buy out Great Southern's majority stake in flagship fund, the Diversified Agribusiness Fund (DAF), which was established in 2002.

The buyback was at a 54 per cent discount to the $36 million book value of the units.

RFM founder and managing director David Byrant said: "This has been a long, drawn-out process, with many twists and turns since McGrathNicol was appointed receivers/managers to Great Southern on 18 May last year."

RFM has raised about $12 million in DAF and another of its funds, RFM Riverbank, to buy back the DAF units from Great Southern. The remainder of the capital was raised from cash and bank debt. DAF owns 70 per cent of Riverbank.

"It was a remarkable achievement in raise $12 million. GSL was in receivership so investors really were taking us on good faith. It's now up to us to repay that vote of confidence by ensuring DAF provides sustainable, low volatility returns for investors. We are now looking at ways to provide liquidity to enhance the attractiveness to financial planners and clients," Mr Bryant said.

The buyout of the Great Southern stake in DAF was the last step in severing all ties between GSL and RFM.

In December 2009, RFM management reached commercial agreement with McGrathNicol on buying back RFM for an undisclosed sum. The change in RFM's ownership will occur simultaneously with the DAF buy out.

"We were always confident that the best option for the receivers was to sell RFM as a going concern, and that the RFM management was ideally placed to make the purchase," Mr Bryant said.

The other issue RFM management had to resolve was to secure new leasing agreements for RiverBank's almond orchards and water rights after Great Southern went into receivership. These assets are located on two properties, Mooral and Yilgah, near Hillston in central west New South Wales.

"Quite surprisingly, about 40% of GSL's growers have decided to continue with their almond investment, despite the demise of GSL. We were expecting about 25% to stay in the schemes, so to get 40% was a great outcome," Mr Bryant said.

"At the same time the publicly listed Select Harvests, the second biggest almond producer in the world, has entered a 20-year agreement with RFM to lease more than 1200 hectares of almond orchards. This is a tremendous result for RFM as it guarantees long-term lease payments to RiverBank."