Forum Archive Index - April 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

>
>
> i think there is another signal that might prompt me to buy more
> airva -- if singapore air (or someone) showed interest in buying
> into ansett.  
>
>
Agreed.
>
> 
> snoopy, i don't quite understand the ramifications of airva
> announcing a capital note issue.  why do you see this as a positive
> sign?  wouldn't it mean that they need yet more money -- and they
> already have cash.  i seem to be missing something, and would love
> an explanation if you have enough time.
> 
>


I think there is a difference between 'needing money' (as in being 
called upon by your banker to cough some up) and 'needing money' in 
the sense of being able to do exactly what you want with it.  I know 
that AirNZ wants to equip Ansett with new planes, but the planes 
won't be falling out of the sky if they don't.  

The capital note issue would necessarily mean an increase in debt for 
AirNZ.   They could use it to replace some of their existing debt on 
more favourable terms, for instance.

Investors don't like uncertainty, and I don't think any form of 
capital raising (being Singapore Airlines buying directly into 
Ansett, another cash issue or capital notes) would go ahead without 
there being some form of stable outlook ahead.   Even if the stable 
outlook is bad (price wars for the medium term future) investors will 
want to be sure just what they are letting themselves in for.  In the 
case of the capital notes this would mean being able to set a market 
competitive interest rate and conversion terms in line with Air New 
Zealand's perceived risk.   If the capital notes come out, you can be 
sure that the high powered bankers will have gone through this 
exercise.  And if the corporate bankers are satisfied with the terms 
and conditions of such a capital note issue, then I would be too. 
SNOOPY


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