A 1998 FEDERAL Government decision to freeze sales from the wool stockpile has returned to haunt thousands of Australian woolgrowers, who now have less than two weeks to repay substantial loans borrowed against their equity in the stockpile. Woolgrowers Australia wide have received letters from Elders Rural Finance in recent weeks, requesting final payment of advances worth tens of thousands of dollars by December 31. The debts were acquired in late 1997 when many woolgrowers accepted an offer from Elders Rural Finance to take loans against their equity units in Wool International (WI), the then stockpile liquidator. Cash-strapped growers saw the advances of $1.62 per unit as a low-risk and much needed way to secure fresh operating cash after six years of depressed prices. Advised that the stockpile would be completely sold by 2000 under the Government-imposed fixed selling schedule, many growers took the offer believing their WI equity proceeds, then estimated to be worth $2.49 per unit, would be available in time to repay the Elders debt before the December 31, 2000, deadline. However, with only 10 days remaining until the debt has to be repaid, circumstances have changed considerably from those growers borrowed against three years ago. A Federal Government decision to freeze stockpile sales for most of the 1998-99 season, in a bid to halt plunging wool prices, effectively ended the chance of woolgrowers receiving their final WI payout in time to pay out the Elders loans. With 570,000 bales still left in the stockpile, growers will not receive their final equity pay out for another 18 months. And, compounding the plight, revised estimates now place the final pay out value of WoolStock shares at only $1.07/unit (after a recent 20c/unit distribution), far short of the $2.49/unit growers were advised in 1997 that their shares would finally be worth. The average debt faced by growers through the equity deal is thought to be between $20,000 and $30,000. Letters advising of the impending deadline have been sent to growers by Elders Rural Finance in the past fortnight. The letters advise that debts not paid in full by the December 31 deadline will incur an interest rate rise from 9pc to 14pc for the following 90 days. Beyond that, legal action to recover the debts may apply. Elders Rural Finance general manager Mike Walter said Elders empathised with growers caught out by the Government-imposed sales freeze and would assess repayment and refinance options on the individual merits of each case. However, the company could not make any promises and expected all loans to be repaid, he said. "Elders over a long period of time has accommodated the requirements of its clients and it will continue to do that," Mr Walter said. "But that doesn't mean that Elders can be Father Christmas either. "Some people have overlooked, either mischievously or genuinely, the fact that it was moneys borrowed and it does have to be paid." "We are wanting people to live by their agreement and to let us know if they are having any difficulty with that." Only Elders knows the exact number of woolgrowers affected. Woolgrower groups believe the number is substantial, given that by 1997 many wool enterprises had long-since exhausted existing credit channels as a result of prolonged poor conditions and saw the equity offer as a source of welcome cash relief. In 1997, then Elders Rural Finance manager Allan Daddow told media he expected at least one-third to one-half of woolgrowers to take up the offer. Last week, Mr Walter said there was an element of woolgrowers who would struggle to repay the debt, but they were clearly in the minority. "In terms of the overall industry, it is not a large percentage," he said. Estimates circulated by Elders Rural Finance when the offer was made, placed final stockpile distributions to growers at $2.25/unit, not counting a 24c/unit payout made by Wool International in November 1997. Based on a 9pc interest rate, which compared to an overdraft rate of 9.75pc charged by commercial banks at the time, growers were told that an equity payout of $2.05 would be required to pay off the loan. Woolgrowers who do not pay up by December 31 will have 90 days at a higher 14pc interest rate to pay out the loan. Mr Walter defended Elders' decision to raise the interest rate. "The 9pc was very much a discounted rate, which we really could have put up but did not once the Government changed the rules," he said. "The 14pc is less than the 15.5pc interest rate we normally apply to this type of lending with this type of risk. "We really have no option but to have the rate reflecting the risk which is commensurate with this type of lending. "The unfortunate thing is that we're appearing to be the ones that are making life difficult, when in fact it was really the Government that made life difficult because they changed the rules." Mr Walter said many growers had contacted Elders to indicate they would honour the repayment agreement within the 90-day extension period. WA Farmers Federation Wool Section chairman Tony Gooch said most growers would have difficulty repaying the loans. "At a time when interest rates have stabilised and are predicted to move lower, the increased interest rate of 14pc and rearrangement of security is a major impost for growers," Mr Gooch said. "The dilemma that growers are faced with is whether to refinance the loan, which will most probably attract a higher interest rate than the current 9pc per annum when the real value of the shares remains unknown "The only way growers will be able to make a decision on this issue is when the full value of the shares is realised and, for that to happen, WoolStock Australia needs to be listed." Growers are also questioning why, with prices now back to the same levels of October 1997, the valuation of WoolStock shares is down to $1.07c, compared with $2.25 plus in 1997.