Unless Massey-Ferguson Ltd., the Toronto-based international farm implement maker, can get some government help, prospects for survival in its present form appear dim.
It reported a third-quarter loss of $66.2 million from operations in the period ended July 31, compared with a $25.5 million loss a year earlier. The loss in the latest nine months is $62.9 million, compared with a profit of $8.75 million, a year ago.
Massey has been trying to enlist the aid of the Canadian and Ontario governments for a financial aid package but to date has had little success. Last week federal officials rejected a Massey plan involving government guarantees for at least part of a $500 million stock offering.
This week the company says the principal condition for assistance would be its ability to raise a total of about $600 million (Canadian) of new capital. Discussions have been held with interested parties and the company has received from Canadian Imperial Bank of Commerce and the Ravelston-Argus group, indications "of their willingness in principle to participate in such a financing program subject to such a number of conditions."
Massey says to meet this total, "it will require significant investments additional to that from Canadian Imperial Bank of Commerce and Ravelston-Argus group, part of which additional investment would be sought by rights offering to existing shareholders and by giving employers, distributors, dealers and other interested parties the opportunity to participate in the refinancing."
Massey also says it is negotiating with its lenders to have them temporarily relax certain conditions in loan agreements related to debt equity ratios. Massey's problem for the past several years has been very high ratio of debt relative to share capital.
Victor Rice, Masey chairman, says the company expects a moderate upturn in the North American farm machinery market resulting from lower interest rates, which are now rising, and stronger commodity prices. But, he adds, "It is likely that the company will show a significant operatinf loss for the period." l
Stock market analysts are almost universally pessimistic about Massey's prospects without government assistance.G.P. Reid of Gardiner Watson, Ltd., a Toronto brokerage house, says he is not surprised by Massey's results "because the entire industry had a tough third quarter." He adds, however, that unless there are government guarantees, "who would want to buy their paper?"
Reid suggests that without government aid, refinancing would be extremely difficult if not impossible. In that case, he says, Massey might still exist as a company but in a much different form.
Other analysts were even more skeptical about the company's ability to survive on the basis of private sector efforts alone. Several suggested that without some government guarantees, the company faces insolvency or bankruptsy. w
Ravelston-Argus is the major stockholder in Massey with about 16.5 percent of the company's issued shares. The Commerce Bank, Canada's second-largest chartered bank, is Massey's major banker. Rice says, "I am encouraged that the company share of the farm machinery market worldwide has shown further improvement despite depressed conditions and the disappointing financial results. The market-share gain arises from renewed confidence in MF products which has resulted in an increase in our world-wide penetration of tractors and combine harvesters in the last nine months."