Hundreds not claiming Tranz Rail compo

Friday 24th April 2009

The Securities Commission is waiting to hear from some 535 shareholders eligible for the remainder of the $27.5 million compensation from the Tranz Rail insider trading settlement.

So far, about $17.3 million has been paid out to 30 counterparties, the regulator said in a statement. The Commission reached a settlement on the Tranz Rail insider trading case in June 2007.

Those eligible held Trans Rail shares on February 2 and February 12, 2002.

The Securities Commission filed insider trading proceedings in 2004 against Midavia Rail Investments, Berkshire Fund III, former Tranz Rail executives Michael Beard and Mark Bloomer, and former directors Carl Ferenbach and David Richwhite.

It was the first time the commission had used its power to take court action for insider trading. The commission's inquiry focused on sales of shares in the first half of 2002, before the share price of the company began to deteriorate from about the middle of 2002.

The shares tumbled to a record low 30 cents on April 16, 2003, having traded at $4 at the beginning of 2002. The commission's case was that the parties who sold their Tranz Rail shares in early 2002 had information about the company which was not publicly available.

This information would have affected materially, or would have been likely to affect materially, the price of the shares if it had been publicly available.

The commission has written to some 3,100 former Tranz Rail shareholders. The High Court has given approval to the commission to publish the names of the remaining shareholders on its website.

The former state-owned company New Zealand Rail was sold in 1993 for $400 million to a group including investment bankers Fay, Richwhite, Wisconsin Central and Berkshire Partners, and later became Tranz Rail.

In a sorry saga, the government eventually re-acquired the rail network for $1 to take control of the company for about $76 million. It was sold again to Australia's Toll Holdings in 2003 and reported a $346 million loss for the six months ended December 21, 2003.

The Labour government bought the assets again in May last year for $665 million, against the protests of the then National opposition which is now stuck with the asset in government and is committed to trying to wring an economic return out of the railroad.

Businesswire.co.nz

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