CAPITAL STRUCTURE CONSULTATION 2021
OTHER OPTIONS CONSIDERED, BUT NOT PRIORITISED A number of other options were considered in the review but not prioritised. The main ones are summarised here, but again there are variations within each:
Options that allow Unshared Supply We considered allowing a greater proportion of unshared supply in the
UNSHARED SUPPLY + Fund
While unshared supply options could be implemented with or without the Fund, if the Fund was retained and a large proportion of farmer owners wished to transition to unshared supply, it could grow significantly and we would likely need to move to a Capped Fund. If a significant number of farmers chose to become unshared, this could also have implications for concentration of ownership amongst a small group of farmers.
Co-op. Unshared supply means that milk could be supplied to the Co-op without any capital investment. We did not prioritise unshared supply options because they are less aligned to our Co-operative Principles, and they set up incentives for farmers to become unshared suppliers in order to free up capital. We feel it is important that our capital structure should be on the basis that all suppliers to the Co-op have some capital commitment or “skin in the game”.
FARMERS
EXTERNAL INVESTORS
Tradeable investment shares
Units
Unshared Supply
FSF
UNSHARED SUPPLY No Fund
FARMERS
Tradeable investment shares
Unshared Supply
Traditional “nominal share” options This option would require us to return to a nominal share only structure, similar to a traditional co-op model. This would mean that farmer owners would only need to hold a nominal share (e.g. $1) for every kgMS supplied.
TRADITIONAL CO-OPERATIVE MODEL
prioritise this because transitioning to a nominal $1 share would require all current shares on issue to be bought back. This would require significant capital to be returned to farmer owners, which would be unaffordable. We also do not think this would be achievable under the current regulatory environment in New Zealand.
FARMERS
Nominal shares
While this would significantly reduce the barriers to entry and incentives to leave for all farmer owners, we did not
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