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The Crossings falls short but proceeds

The Crossings vineyard and winery is to go ahead despite a $3 million shortfall.

Wednesday, January 10th 2001, 3:35PM

by Philip Macalister

Farmers Mutual Group's (FMG) Crossing vineyard in Marlborough is going ahead despite the recent capital raising falling short by about $3 million.

Last year FMG decided to develop The Crossings, an internationally-focussed vineyard and winery in the Awatere Valley, by combining its two existing vineyards, Medway and Brackenfield, and buying an additional land.

To help finance the deal, The Crossings sought to raise about $7 million through a share and preference share issue. However, only about $4 million was raised when the offer closed just before Christmas.

FMG chief executive Michael Millar says the full amount wasn't raised because of the soggy equity market, plus an unfavourable report in one of the weekly business papers.

He says $7 million was a reasonably big ask, especially in the conditions which existed at the time.

While the offer fell short of the target, it isn't likely to have a major impact of the viability of the project.

Millar says it was originally intended that The Crossing would be debt-free, but now it will, in all likelihood, have to raise some finance from the banks.

He says The Crossings should have little trouble raising debt finance as a number of banks had already indicated their willingness to lend the business money. Also, the money wasn't budgeted to be spent until a winery was built in several years time.

One option that is open to The Crossing is to do another capital raising closer to the time when the winery is due to be built.

The offer managed to attract a reasonable number of new investors. About one third of those who subscribed were existing Brackenfield and Medway shareholders, while the balance were new investors.

The Crossings is currently looking for an international partner to distribute its wines.

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

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