Anderton's bank float costs challenged

Friday 17th August 2001

By Jock Anderson

A securities expert says Deputy Prime Minister Jim Anderton's cost estimate of $4-7 million for a dumped People's Bank $40 million share issue is "extraordinarily high."

Mr Anderton's figures bear no relation to other similar offers, the estimated costs of which come in well below his figures.

After the Alliance leader's major faux pas of promoting the bank as a safe investment, the taxpayer is lumbered with the full establishment costs of $80 million instead of $40 million for a public/private partnership favoured by government advisers (NBR, August 3 and 10).

Mr Anderton is under investigation by the Securities Commission and his prosecution is sought after a complaint he breached securities law when promoting the bank.

He gave the high cost of a public float as one of the reasons the government decided to totally fund the bank and not proceed with a public/private partnership.

Comparing Mr Anderton's $4-7 million estimated cost for a $40 million issue with other similar offers, Chapman Tripp securities expert Tim Williams said Mr Anderton's figures seemed "extra-
ordinarily high."

Mr Williams said the $4-7 million estimate was well above the costs of most of the major New Zealand offerings Chapman Tripp had acted on in the last five years.

He said the recent Mission Contact Finance redeemable preference share offer for $150 million was a suitable comparison.

"It had estimated expenses of $2.6 million and it was more than six times the size of the proposed People's Bank offer," Mr Williams said.

Drawing total estimated costs from the relevant prospectus Mr Williams illustrated the estimated expenses on other similar offers with the table above.

Asked where he got his $4-7 million figure, Mr Anderton said it came from his official and professional staff.

Meanwhile, a government witch hunt had not found a source for highly embarrassing uncensored official documents obtained by Act New Zealand finance spokesman Rodney Hide concerning the bank and New Zealand Post, some of which are now on the Act website at <http://www.act.org.nz/kiwibank>.

Mr Hide said Treasury reports showed the government to be irresponsible in providing $80 million to New Zealand Post for the bank and showed NZ Post's board to be irresponsible in proceeding with the bank in the face of its own independent advisers recommending against it.

"Treasury officials advised that they considered the People's Bank to be of negative value, to pose considerable fiscal risks and the public policy benefits to be insignificant," said Mr Hide, who intends to continue releasing more secret papers.

ESTIMATED EXPENSES ON SIMILAR OFFERS
Date	Name	Size ($m)	Est costs ($m)

June 01	Mission Contact Finance (rps)	150	2.6
Aug 00	Genesis R&D Corp	34.5	2.84
July 00	Edison Contact Finance (rps)	240	4.8
May 00	eVentures NZ	30	1.4
June 99	Ryman Healthcare	27	2
June 99	Colonial First State Prop	145	4.9
May 97	Infratil International	49.9	2.2

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