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Industry unsure over First Milk capital restructure

First Milk’s decision to convert member investments to shares in the company has prompted a mixed response from the industry.

Joel   Durkin

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Joel   Durkin
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Mr Oakes suggested the move may de-value what was owed by First Milk to its members
Mr Oakes suggested the move may de-value what was owed by First Milk to its members

Last week the dairy co-operative announced members’ loan capital would be converted to equity as part of the firm’s ongoing restructuring.

 

A First Milk spokesman confirmed to Farmers Guardian this would create tradable shares, but there was little clarity about how this equity could be used by members and those wishing to leave the firm.

 

Removing risk

 

NFU dairy board chairman Michael Oakes said converting money owed to its members to equity took risk away from First Milk and placed this on members’ side.

 

"For ex-members and members it is looking like it is going to be difficult to access that money in future," he said.

 

"But in reality it has made that business more sustainable so there may be more chance of members and ex-members getting [money owed to them]."

 

Devaluation

 

Mr Oakes suggested the move may also de-value what was owed by First Milk to its members.

 

"As the business stands today, shares in First Milk do not have a great value," he said, adding farmers needed greater clarity on the details of how these shares could be used.

 

The move also prompted mixed feelings at farm level.

 

Mixed feelings

 

One farmer, who asked not be named, said he was owed in the region of £30,000 by the co-operative in the form of capital repayments, but was unsure whether he would ever realise anywhere near this figure.

 

He added: "While it is bad for me, I left First Milk some years ago and just feel for those farmers who have to ride out the poor prices the firm has paid in recent months."

 

The move forms part of a raft of significant changes to First Milk since Mike Gallacher’s appointment as chief executive last year.

Capital structure

Chairman Clive Sharpe said: "A final element of our turnaround plan is addressing our capital structure."

He said the announcement had been made so the firm could concentrate on improvements in its ’relative milk price’ and rebuilding the long-term future of First Milk once the new financial year began in April.


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