Forum Archive Index - September 2001

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

Hi John,
>
> 
>If I did buy now, what does the prospect of statutory-management
>mean? 
>
>
I have just heard a Radio New Zealand interview with Paul Heath, a 
Laywer with some expertise in Statuatory Management.

He said that there was quite a stringent test if statuatory 
management was to come to pass.  Basically you would need to prove 
that the current directors were fraudulent or reckless.  While he 
didn't have the information to know if this was the case, his 
immediate thoughts were that this was unlikely, and therefore 
statuatory management was unlikely.
>
>
>Will the shares become void?  
>
>
No, but the current directors will no longer be allowed to run the 
company. 
>
>
>Will I become the end-of-the-line for any payouts?  
>
>
That is a bit of a cheeky remark isn't it John?   Just because you 
buy shares doesn't mean anyone at Air New Zealand owes you anything!

But if the company is liquidated, I wouldn't be holding my breath for 
any capital return to shareholders, if that is what you mean.
>
>
>Or is it just a risky tunnel shareholders would go through while 
>there is a transformation in the business.
>
>
Yes, that would be the situation.
>
>
>undertaken by the Government, but at the other side they
>would continue to have some sort of stake in the (new?) carrier?
>
> 
Assuming the restructuring was successful, you would have a stake in 
the new business - yes!   But what stake you would have depends
on the outcome of the rescue package.

It is likely that whatever stake you end up with will be severely 
diluted.  If the current 'rescue package' goes through, the dilution 
of your holding will be as follows:

>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 15c, not the fantasy 67c, then both
Brierley Investments and Singapore Airlines will be
getting 67/15=4.46 times the number of shares that they would have 
had had the price remained at 67c..

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 0.15c each.   This means they are
getting 150/.15= 1000million shares each, leading to a
total of 750+2(1000)= 2750m shares on issue.   

As of now Singapore Airlines holds 25% of Air New Zealand
or 0.25x750=187.5million shares.  After this exercise, at
15c per share issue price, they will hold 187.5+1000=1187.5m 
shares, which equates to 1187.5/2750= 43.1% of the company.

As of now Brierley Investments holds 30% of Air New Zealand
or 0.3x750=225million shares.  After this exercise, at
15c per share issue price, they will hold 225+1000=1225m 
shares, which equates to 1225/2750= 45% of the company.

It doesn't take a genius to work out that under the current 
rescue scheme Brierley Investments and Singapore Airlines will own 
45%+43%= 88% of the company, leaving a mere 12% for all other 
existing shareholders, down from 45% today.

Looking at it another way, existing Air New Zealand shareholders 
currently have shares with a net tangible asset backing of 500/750 = 
67c per share.

After the proposed reconstruction (with $300m of new equity 
injected) on the above terms the net asset backing falls to 850/2750=
31c per share.  This doesn't look like a very good deal for existing 
shareholders (apart from Brierley's and Singapore Airlines of course) 
to me.

I would certainly advise all AIRVA/AIRVB shareholders to vote 
*against* any restructuring plans on those terms.   We need an even 
handed rights issue.  Not one that transfers most of the 
assets of the company from existing shareholders to Brierley 
Investments and Singapore Airlines!  SNOOPY




---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"Q: If you call a dog tail a leg, how many legs does a dog have?"
"A: Four.  Calling a tail a leg doesn't make it a leg."


----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.