THE country's biggest honey producer, Capilano Honey, must pay down its debt by $10 million by the end of March to please its bankers National Australia Bank, and has been forced to seek the removal of arcane restrictions in its company constitution to attract fresh funds from outside investors.
Capilano Honey today will hold its annual meeting, at which shareholders will be asked to eliminate the company's 10 per cent cap on shareholdings and remove the special voting rights attached to a ''foundation share'' controlled by Capilano Beekeepers.
The Bendigo Stock Exchange-listed agribusiness expects it can raise $4 million from internal resources.
However, the board believes existing shareholders won't be able to cover the shortfall as most rights issues are typically undersubscribed and the 10 per cent shareholder cap would limit participation.
Recent approaches to potential new external investors by Capilano Honey to raise the estimated $6 million to please its bankers triggered a negative response to Capilano's constitution, coercing directors to make the necessary alterations.
Trevor Morgan, chairman of Capilano Honey and Capilano Beekeepers, said Capilano Beekeepers would use its foundation share to support the resolution at the AGM. ''Capilano Honey believes that it will only be able to attract a suitable investor to inject the funds required to fill any shortfall resulting from a rights issue, to meet the banks' requirements, if these provisions of the constitution are changed,'' he said.
It comes at a bad time for Capilano Honey as drought limits honey supply and ratchets up the cost of raw honey.
Capilano Honey recently recorded a profit of $707,000 for the year to June 30, but posted a loss of $7.5 million in the previous financial year due, a shift to private-label brands and adverse exchange rates.
Following a recent review by NAB the company was presented with a set of new debt covenants that tightened Capilano Honey's security position through lower loan-to-value ratios and introduced earnings before interest, taxation, depreciation and amortisation (EBITDA) covenants.
The new covenants meant Capilano Honey was asked to reduce its overall debt position by $10 million.