Chief among the questions leading up to the Jan. 31 vote by Saskatchewan Wheat Pool bondholders is, will the second largest grain company in Canada survive?
If not, who will end up with the grain-handling network?
The answers hinge on whether bondholders approve a financial restructuring package that would see their $300 million in medium-term notes and $105 million of the pool’s bank debt exchanged for a new series of notes expiring July 31, 2008.
The banks like the plan, but a committee claiming to represent 42 percent of the bondholders has already rejected it.
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
The committee says it will move to adjourn the Jan. 31 meeting until Feb. 25, when an alternate proposal will be put forward.
Most agree the pool’s facilities will continue to operate after Jan. 31, no matter what happens.
There has been speculation for months that one of the large American-based companies like ConAgra, Archer Daniels Midland or Cargill would snap them up.
None of these companies could enter the picture in a major way before, because legislation governing the pool set a 10 percent ownership cap on Class B shares. That legislation was changed last month but Class B shareholders have not yet been presented with a proposal to change the ownership structure. Two-thirds would have to approve it.
And at shareholder meetings last week, Schmidt flatly rejected the idea of an outside investor coming in at the last minute.
Daryl Kraft, agricultural economist at the University of Manitoba, believes the company would be sold in pieces if it fell into bankruptcy.
“It’s my judgment that it probably isn’t likely that someone would come in and take over the organization, unless of course it was marked down considerably,” he said.
Kraft said it would be best for farmers if the parts were sold to companies that compete with each other.
Hugh Wagner manages the Grain Services Union, which represents about 1,100 pool employees.
“If they file for protection from their creditors it will be business as usual,” he said. “For the average union member, the collective agreement continues” if the company is purchased.
Wagner said the uncertainty surrounding the pool is hurting morale.
Farmers are also feeling that.
Darryl Jordheim is a pool delegate from White Bear. He said what he hears and reads in the media is not entirely what he hears in the country.
“A lot of people are not happy with some of the things that have happened,” he said. “But they’re also looking at what it would cost if they lose the pool.”
Some of the uncertainty has crept into the market, too.
Dave Reimann, of Benson Quinn-GMS in Winnipeg, said he can’t quantify the effect the pool’s financial situation has had but he knows it’s there. He cites a recent downturn in canola markets.
“Exactly how much (the pool’s woes were at fault) is open to speculation,” he said. “From a trader’s perspective sometimes nervousness or fear is a factor.”
