Forum Archive Index - September 2001

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

Hi Malcolm,
 
> Snoopy
> Try reading this article in australian financial review, by Alan
> Kohler. I hope you can get it of the site I get the print version
> every weekend. This is just an address not A link.If somebody has
> access to print version it is on back page.
> http://afr.com/commentopinion/ Malcolm Cameron
>
> 
Thanks for the reference.

The AFR comment is not on the AFR site unfortunately, even to 
subscribers, so may you would be good enough to present a precis of 
it for us Malcom.

Meanwhile AIR certainly has my attention.  There seem to be various 
key points which the mainstream media is continuing to miss.

Firstly, the decision to allow Air New Zealand shares to be 
reinstated on the Australian Stock Exchange has been reversed.  They 
seem to be still suspended 'over there' and I am not really sure why.

The second media proposition is that Brierley Investments and 
Singapore Airlines now own 37% and 34% respectively of a restructured 
Air New Zealand.   This assumes an Air New Zealand share price can be 
sustained above 60c for a 100 day period.   With the shares now down 
to half that, this seems a fantasy.

>From the Air New Zealand press release of results:
"This issue will be priced at the lower of 67 cents per share or the
volume-weighted average price at which the Company's shares trade 
over the 10 business days preceding shareholder approval."

If this price is 30c, not the fantasy 67c, then both Brierley 
Investments and Singapore Airlines will be getting 67/30=2.23 times 
the number of shares that the mainstream media thinks they are 
getting.

As closely as I can figure, Air NZ now has 750million shares on 
issue.  Singapore Airlines and Brierley Investments are intending to 
put in $150million each at the assumed figure of 0.67c each.   This 
means they are getting 150/.67= 225million shares each, leading to a 
total of 750+2(225)= 1200m shares on issue.   

Previously Singapore Airlines held 25% of Air New Zealand or 
0.25x750=187.5million shares.  After this exercise, at 67c peer hsare 
issue price, they will hold 187.5+225= 412.5m shares, which equates 
to 412.5/1200= 34.4% of the company.

This is in line with what Air New Zealand said would happen.
So far so good.

Now consider what happens if the shares are issued at 30c.  Singapore 
Airlines would therefore get 150/0.30 = 500million shares.  The 
total amount of shares on the market would rise to 750+2(500)= 1750m.
Singapore Airlines would then own 187.5+500=687.5m shares after the 
restructuring.

687.5/1750 means Singapore Airlines would then get 39.3% of Air New 
Zealand, which is beyond the government's 35% cap.  There is no 
guarantee that Air New Zealand can retain their international landing 
rights under this scenario.   This rescue deal is now dead IMHO.   
SNOOPY




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