Hirepool is the latest company with trans-Tasman operations to settle a tax dispute with the Inland Revenue Department, forfeiting $58.6 million of tax losses generated by the use of mandatory convertible notes, one of two commonly used structures the IRD has successfully challenged in the New Zealand courts.
The settlement, on June 9, is recorded in the prospectus for the Hirepool float, which will seek to raise up to $262 million from investors next month, as existing Australian investor Next Capital and other shareholders seek both to sell down their shareholdings and raise fresh capital to repay debt.
The $58.6 million is the full value of tax credits claimed by Hirepool from the use of MCN's, which are a structure that sought to create the most tax-effective balance of debt and equity held by Australian-controlled companies with New Zealand operations.
MCN's and their close cousin, optional convertible notes, gained favour in the early 2000s, but have fallen foul of a string of tax rulings that would have stretched to the country's final court of appeal, the Supreme Court, had an appeal by Australian firm Alesco not been settled on the eve of hearings scheduled in February.
Alesco was a test case, which appears to have opened the floodgates on settlements with other taxpayers. Among other Australasian corporates caught up are Qantas, Transfield, Telstra Corp, Toll Holdings, and Ironbridge, the former owners of Mediaworks, which runs the TV3 and RadioLive networks.