KTG Agrar : Update on the interest payment and current developments

Update on the interest payment and current developments. Short interview with Siegfried Hofreiter, CEO of KTG Agrar SE.

On 6 June KTG Agrar announced that the interest payment on the 2011/2017 bond cannot be made on time. What is the situation right now?

Siegfried Hofreiter: First of all I would like to emphasise that our business operations are going well. Last year's good and profitable trend in both our energy production and our Bio-Zentrale activities has continued and both businesses are performing at record levels after the first five months of the current financial year. The situation in our farming operations looks excellent as well. In addition, we have held numerous intensive talks with potential partners for the interim financing as well as with institutional investors. In these talks we have emphasised two strong arguments which make us attractive to lenders.

What exactly are these two strong arguments you are speaking of?

Siegfried Hofreiter: For starters, there is the notarised sale-and-leaseback of farmland. Note that we have bought additional land in the first six months of 2016. At the bottom line, our total land holdings are now even a little larger than at the beginning of the year. In addition, we have only a few weeks to go until harvest time and prospects for this harvest are outstanding. We will probably fetch higher prices and harvest larger volumes than last year. This means that we anticipate reaping a harvest worth a good EUR 60 million from our 46,000 hectares of farmland. The value of the harvest is going up all the time thanks to the precipitation in recent weeks and the pick-up in the prices of grain, maize, rapeseed and soybeans. Prices of both diesel fuel and fertilizer were down between 30 and 40 percent year-on-year when orders were placed in spring, which means lower operating costs.

You say the farmland sale has been finalised and notarised. So what is holding up the payment?

Siegfried Hofreiter: It is not due to the buyer's unwillingness to pay; anyway, the buyer has provided a bank confirmation of his solvency. Selling farmland is more complex than selling a house. You need certain official approvals before payment can be made. In this specific case it is taking longer than usual and this is why we want to arrange an interim financing package at short notice.

And what about the refinancing of the bond maturing in June 2017?

Siegfried Hofreiter: Despite the currently challenging situation, we have registered remarkable interest on the part of Asian and Anglo-Saxon investors in our sustainable business model, our professional agricultural production and our production of renewable energy under Germany's EEG Act. After all, we produce healthy food for more than 1 million people as well as enough carbon-neutral energy to supply a city the size of Hannover.

This interest has been very pronounced on the part of investors who expect a near-time global economic crisis and therefore seek to invest in tangible assets; against this background, they view the agricultural and food industries, in particular, as well as the energy sector as winners in such a scenario, the rationale being that people will always need to eat.

What are your objectives for this week?

Siegfried Hofreiter: Following on from last week's talks, finalising the interim finance package is now our top priority. In addition, we are highly motivated to start the harvesting season. In agriculture, you typically incur nothing but costs during the first half of the year but now we are ready to reap the rewards. I would also like to repeat my apologies to all our investors. Only success breeds self-confidence and you learn from failures and setbacks. The right way to emerge from a crisis stronger is to clear our minds and focus on positive thoughts to drive our actions. I am convinced that we will make it through this critical time. At this time I would also say thank you to our employees who continue to work loyally and with great commitment in this challenging situation. I am also thankful to all those who have encouraged us through their objective criticism and, above all, positive support.