More cash promised as Air NZ share price settled

By Phil Boeyen, ShareChat Business News Editor

Tuesday 27th November 2001

The government has agreed to pay 27 cents per share for its Air New Zealand (NZSE: AIRVA) stake and is promising the airline further funding of up to $150 million before June, 2003.

The price for the shares is part of a recapitalisation deal announced in September after the New Zealand national carrier cast Ansett Australian adrift and looked in danger itself of going bankrupt.

Under that deal New Zealand taxpayers forked over an initial $300 million loan which will be converted into new convertible preference shares at 24 cents per share.

Now the second tranche of the $885 million package has been set with the Crown agreeing to buy $585 million of shares at 27 cents each to take its total stake to 82%.

The price is above the convertible preference share issue but below what the airline shares are currently trading, having been boosted recently in light of falling fuel prices.

Finance Minister, Michael Cullen, says the transaction will take place in January subject to shareholder approval at the Air NZ AGM to be held next month.

"The price negotiated between the Crown and the Air NZ Board takes into account the current state of the company, and its future prospects and risks.

"It is below were Air NZ shares are currently trading but the recent rise in the share price may reflect the market's confidence that the Crown's rescue package will restore the viability of the company".

Dr Cullen says the government has also government had committed itself to provide up to $150 million in further funding before June, 2003.

"We acknowledge that Air NZ faces considerable uncertainties in the near term and that a further capital injection may be required. Terms for the additional money will be negotiated as and when it is needed."

Legislation to supply the cash injection will be introduced into Parliament next week with approval due before the end of the year.

Air NZ says it has received comprehensive professional independent advice in recent weeks concerning the price which the Crown should pay for its second tranche and agrees that 27 cents is fair and reasonable in the current circumstances.

Acting chairman, Jim Farmer, says the price is an appropriate level for a major investment which will recapitalise the company.

Just over a year ago Air New Zealand issued around 176 million new shares in a rights issue to raise $284 million. The shares were issued at $1.50.

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