Forum Archive Index - September 2001

[<nickkearney@xtra.co.nz>]

> Snoopy

You're a legend!  Spot on, as has been most of your stuff regarding AIR NZ.

Cheers

NK

 From: "tennyson@caverock.net.nz" <tennyson@caverock.net.nz>
> Date: Mon, 24 Sep 2001 18:12:46 +0000
> To: sharechat@sharechat.co.nz
> Subject: Re: [sharechat] What risk in buying Air NZ shares?
> 
> 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."
> 
> 
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