Administrators are urgently searching for a buyer for S&W Seeds Australia. Photo: S&W Seeds Australia

ADMINISTRATORS are calling for expressions of interest for the sale or recapitalisation of S&W Seeds Australia after the business entered into voluntary administration late last month.

The seed company reportedly owes almost $61 million, including $50M to secured corporate debt financing companies, primarily National Australia Bank, $9.8M to trade creditors and $1.15M of employee leave entitlements.

As of August 7, S&W Seeds has continued to trade with all 56 employees retained.

A subsidiary of United States-based S&W Seeds, S&W Seeds Australia purchases seeds from a network of over 100 Australian growers then, after processing, on-sells them to domestic and international companies.

Its products include a range of grain and forage seeds including lucerne, legumes, ryegrass, sorghum, forage cereal, and sunflowers.

The company operates a seed-cleaning facility in Deniliquin in southern New South Wales which it acquired from PGG Wrightson in 2021.

On July 24, Travis Anderson and Glen Kanevsky from Deloitte were appointed as administrators of S&W Seeds Australia, and on August 7 successfully applied to the Federal Court of Australia to manage the company’s financial situation until August 26 without being personally liable for certain costs.

Mr Anderson wrote in an affidavit filed with the Federal Court of Australia that it was in the best interests of the S&W Seeds Australia’s creditors to continue trading.

He also wrote that the cause of S&W Seeds Australia’s financial issues appears to have started following “significant trading challenges primarily due to the imposition of import sanctions in Saudi Arabia” which prevent its “key customers in that country from purchasing certain seeds”.

It appears this relates to a Saudi Arabia Government department decision to discontinue approvals of import permits for all forages, which includes alfalfa and all grasses, as a means of water conservation.

According to court documents, the administrators are currently in the process of finalising lease arrangements of seven properties, six in Australia and one in Jordan, where S&W Seeds is a tenant.

This process will involve identifying which leases, including vehicles and equipment, are critical for business operations.

Plans to restructure

Parent S&W Seeds Co first signaled that its Australian subsidiary was in dire financial straits in May 2023.

In a statement released to the Nasdaq, the company announced it was evaluating potential avenues to unlock “unrecognised value in its international operations”, headquartered in Australia.

The company said it had retained Bell Potter Securities Limited as its financial advisor and to assist the Board in its evaluation.

The release said the evaluation would include the possible benefits of all business solutions, such as listing the Australian subsidiary on ASX, or a merger arrangement.

S&W Seeds Co chief executive officer Mark Wong said Australia was an important agricultural market and played a key role in the food supply chain.

“Our Australian team has been dedicated to improving and optimising our international operations over the past several years, and we believe they have created substantial value that is currently not being recognised by the broader markets,” Mr Wong said in a statement.

On July 30, S&W Seeds confirmed that evaluation process had not resulted in a suitable transaction and that the Australian arm opted to enter voluntary administration as it was “likely to become insolvent”.

The international operations also appear to be weighing down S&W Seeds other businesses.

In a release published on May 14, the company said it expects it financial year 2024 revenue to be in the range of US$67M-70M.

Approximately $35-37M of this was to come from the international business, down from previous expectations of $45M-50M.

Overall, the company expects to report negative earnings in the range of $6M-8.5M.

The earnings report noted a pasture seed supply shortage in Australia would result in a revenue reduction of $3M-4M for the third and fourth quarters of FY24.

Research collaboration impacts

It is unclear what long-term impacts an S&W Seeds insolvency would have on current research partnerships and joint ventures the company has in Australia.

The company is currently part of a research project with the University of Sydney, seed company InterGrain, Murdoch University and the Leibniz Institute aimed at reducing the impact of crown rust on oat production.

The work received $928,845 in Federal Government funding and is listed as a current project on the Australian Research Council page.

S&W Seeds also undertakes independent research projects with grain and forage trial and demonstration sites across Queensland, NSW, Victoria, and South Australia.

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