Forum Archive Index - August 2001

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

Hi Brian,
> 
>
> Snoopy, can you give a reference for the comment that BIL wont
> take up a cash issue.  Haven't seen it anywhere.
>
>
Oooh, now you have put me on the spot Brian!  The comment was 
made by Greg Terry himself, around the time that BIL were trying to 
engineer the Qantas deal.  The comment wasn't put quite as bluntly as 
I expressed it.

In was made in the context of Brierley's awful experience with its 
investment in Air New Zealand so far.  It was more along the lines 
of: 
"Brierley Investments is not prepared to put any more money into 
Air New Zealand unless we can be guaranteed to get a good return from 
it."
This was to placate the long suffering BIL shareholders.  Mind you he 
also said he wouldn't sell the BIL owned AIRVA shares for less than 
$2 each.  We'll see.

I have perhaps used a bit of licence in interpreting the actual 
words, but the meaning behind it was clear.  BIL wants to get cash 
out of Air New Zealand, not put more in!

I remember there was talk in the media of splits at board level on 
the preferred direction of Air New Zealand

Later I think the official stance was softened slightly to:

"What is best for Air NZ in the long term is best for BIL"

as the board put on a united face.

But the fact remains that with the new takeover code, BIL must find a 
way to reduce their holding to below 20%.   Otherwise any buyer 
bidding for the BIL stake will have to bid for the whole of Air New 
Zealand, and there is no overseas company that will be allowed to do 
that, and no New Zealand company that would want to.  So unless BIL 
reduce their overall holding to below 20%, they are locked into Air 
New Zealand virtually forever!  The easiest way for BIL to reduce 
their holding is to not take up the coming rights issue.
>
>
> With BIL and SIA having a common major shareholder(the
> Singaporean Govt) I can't see them not doing so. 
>
>
The Singapore Government has 25% of Air New Zealand, but only 6.9% of 
BIL through their vehicle Temasek holdings.  Camerlin Group, the 
other big Singaporean shareholder, is not government owned.
>
>
>I can't see how
> being 'unlucky'(fuel prices, $NZ/US,Millenium,Olympics)is painting
> yourself into a corner. Any rights issue would be organised so that
> the foreign ownership issue you mention would be precluded. I think,
>
>
How can the results of the rights issue be guaranteed?   If the 'A' 
shareholders do not take up their rights, and the B shareholders do 
then that skews the ownership in favour of the B shareholders.  You 
can't force the A shareholders to take up their shares.  And who is 
going to underwrite the issue of A shares?  I don't think BIL will.
>
>
> with Singapore Airlines as a major shareholder, a suitably
> discounted cash issue would be snapped up bearing in mind It
> wouldn't need to be offered immediately. 

> I agree that an arrangement
> with Virgin Blue would be desirable but there is no reason why
> Ansett cannot regain market share without it,given  sufficient
> resources and some innovative marketing/management. 
>
>
'sufficient resources' being the key phrase.  In simple terms this 
means money.  And money over and above the $NZ4 billion (Air NZs own 
figures) needed for fleet replacement.   They might just raise a 
couple of billion from a deeply discounted rights issue (5 for 1 at 
40c = $2billion), and match that with another 2 billion in new 
borrowings.   But this is not enough money to allow Air NZ to allow 
them to continue to lose money at the current rate in Australia, let 
alone have any extra loose change for the marketing budget. 

I don't think most people have a handle on the size of the rights 
issue required.   I suspect current Air NZ shareholders funds are 
only around $1.1billion.  Singapores $NZ500m in exchange for getting 
to 49% of the company will only return Air NZ to where they were last 
year.  Shareholders are going to have to put in at least an extra 
$NZ2 billion as the *bare minimum* to get this company on its feet 
again in its present form.   That is just too big an ask IMHO.  
SNOOPY






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