>"does AIR still owe News Corporation the equivalent of 80 million AIR shares?"
Snoopy replied:
"80 million, or however many shares equate to 10.5% of the company
once the upcoming rights issue is completed. You are the thorn in
the side of all AIR analysts Peter, but, once again, you are right on
the button."
I've also had your question sitting around, Peter. Very good question. And thanks to Snoopy for kicking off.
I checked back to an AIRNZ press release by Selwyn Cushing in 18 Feb 2000.
According to Cushing, the financing package at the time was for A$580m (then about NZ$745m), followed by shares equal to 10.5% of market capitalisation "at the time of completion". The 10.5% was to follow 2-4 yrs after the acquisition, and given market values at the time, was worth about A$100m.
Bottom line - AIR still owes News 10.5% of the Air NZ side of the business.
However, I 'm not sure what is meant by "time of completion" - is this at the time of acquiring Ansett, or at the time the second payment is made?
Snoopy's post refers to "10.5% of the company's shares on issue as at 18 February 2000."
If the 10.5% relates to the value of AIR at the time of acquisition, surely that will be a double whammy, particularly if the payback is triggered over the next few weeks as part of refinancing, whilst Air's share values are so low. This would be a lot of shares (the limited extent of my quantitative analysis).
And according to the 5% discount clause:
> "3.11 If Air New Zealand triggers settlement, it must issue 105.26%
> of the Deferred shares to News. This represents an effective issue
> discount of 5%."
This looks like if Air NZ triggers payment in equity, it has to pay the 10.5% plus a bit more as a penalty?!
The financing package was hardly a bargain. Remembering that Air paid TNT A$475m for 50% in 96. Then a further A$580m in 2000. And about A$100m is still owing. That's A$1.15B for a lame horse, which has cost the group a further $2B in lost value, which refuses medication and which nobody yet seems prepared to shoot.
Peter, your post of 1 June is all the more poignant. You concluded that AIR was overvalued, and that the sale of Ansett looked an attractive option for small shareholders! Your assessment - "a badly undercapitalised company not making money with its major shareholders having ulterior motives for what they are doing is a recipe for disaster". Several others chimed in with similar warnings, and back then would have been a good time to bail out.
Neverthless, some of us still hold AIR shares for various reasons, and the focus of the next few days will be on recapitalising. I'm concerned that any further money spent resuscitating Air is sending good money after bad. But then, there may be little choice if we're to get some money back. What do sharechatters think?
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