New lease on life for Rural Funds Management
Rural Funds Management (RFM) has severed ties with its former failed parent company, Great Southern.
The specialist agricultural fund manager has organised the $15 million purchase of Great Southern's 70 per cent stake in its flagship fund, the Diversified Agribusiness Fund.
RFM founder and managing director David Bryant said the buyback is at a 54 per cent discount to the $36 million book value of the units, delivering capital uplift for the fund's investors. The buyback will be funded by $12 million raised through the Diversified Agribusiness Fund and RFM's Riverbank Fund with the remainder of the capital raised from cash and bank debt. Bryant described the $12 million capital raising as a "remarkable achievement" given Great Southern was in receivership.
Bryant said the buyback will allow the group to resume paying distributions to investors from next month. Despite the woes of the group's former parent company, Bryant said his investors' funds had been increasing in value.
Post-buyback the group will seek to rationalise parts of its business, Bryant said, including reducing the number of entities it manages from 15 to five by winding up several unit trusts and, with shareholder approval, merging others in an effort to improve manager focus and reduce costs.
RFM was established in 1997 and sold to Great Southern in 2007, becoming known as Great Southern Funds Management. Great Southern entered administration and receivership in May last year, and by late last year RFM had agreed with Great Southern's receivers, McGrathNicol, to buy back RFM for an undisclosed sum.
In addition to regaining control of its own investments, which include poultry and wine, RFM became the responsible entity of two of Great Southern's almond managed investment schemes.
"No other Great Southern horticultural schemes have survived. They've all collapsed," Bryant said.
The group stands apart from other agribusiness managers because it doesn't rely on tax-effective policy to attract investors.
Agribusiness investments have been called into question by retail investors following the failure of companies such as Great Southern, Timbercorp and now Forest Enterprises Australia, but Bryant believes investors will understand the distinction between RFM and its tax-effective counterparts.
"So whilst the failure of those companies is regrettable, especially for the sake of investors, I don't think it's necessarily detrimental to the prospects for our business. On the other side the institutional interest in agricultural investment has never been greater," Bryant said.
Bryant said RFM investments offer high distributions, low volatility and high visibility of future income streams for investors with longer term time frames. While the investments are currently relatively illiquid in nature, Bryant said he was working on initiatives to improve that position.
RFM had about $302 million in assets under management at 30 June last year.
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