Taranaki-based New Zealand Organic Dairy Farmers Co-operative (NZODFC) has gone into receivership owing an estimated $15 million and costing about 30 jobs.
Receivers were appointed on Friday and the Okato factory stopped operating on Saturday, according to the Taranaki Daily news.
The directors asked their major creditor, the Bank of New Zealand, to appoint receivers.
Receivers, Andrew McKay and John Cregten of Corporate Finance in Auckland, have not put a figure on the debt.
But the Daily News estimates from company and supplier statements over the past three months that it totals at least $15 million.
McKay says he is still going through the company records "to find out what we've got and where we go from here".
"I simply don't have all the answers in the first 72 hours. But it will take us less than a week to work out whether the business is saleable or can continue trading in some form."
His main task is to maximise the recovery of loans made by the bank.
Fonterra says the company's suppliers can join its co-operative following the receivership.
"The New Zealand dairy industry has a long history of co-operation, so this is a time to look for a practical solution so that no milk is dumped," says Milk Supply General Manager Tim Deane.
NZODFC's Board has recommended the Fonterra offer to its farmers, he says.
Suppliers will be treated the same as any new suppliers and be required to hold Fonterra shares or buy shares progressively on a growth contract to match their milk production.
"We've had a very positive response from NZODFC farmers - it's a lifeline for them, that they will have someone to pick up their milk," Deane says.
"And it's also good for our Fonterra farmers - this will have a net benefit for Fonterra Co-operative and our farmers, bringing in new equity from shares and improving the company's fixed cost recovery."
Suppliers will initially be offered contracts to supply Fonterra for the remaining weeks of the 2009/10 season, receiving the Fonterra Milk Price minus 10 cents per kgMS (kilogram of milksolids), with no organic milk premium.
Organic share-backed milk will attract Fonterra's prevailing
organic premium providing it meets all Fonterra's organic supply
criteria.
