By DANIEL RIORDAN
The Stock Exchange is looking into Air New Zealand's $284 million rights issue after the airline downgraded its profit forecasts less than four weeks after telling potential investors that it expected to do well this year.
Exchange chairman Simon Allen said it had fielded concerns from several investors and wanted to find out what changes had occurred to cause Air NZ to update its forecasts and whether they could be justified.
Mr Allen's move follows murmurings from fund managers that they may consider legal action over the misleading forecasts in the prospectus for the rights issue.
The one-for-three renounceable issue, which closes at 5 pm today, is priced at 150c and available to A and B shareholders.
Air NZ's A shares (available only to New Zealanders ) yesterday sank to a two-year low of 148c. B shares also fell to a four-month low of 196c.
On Wednesday, Air NZ chairman Sir Selwyn Cushing warned that first-half profit before one-time gains would drop by 50 per cent from last year's $83.4 million because of higher fuel costs, the lower dollar and increasing competition.
One angry investor who applied for rights, Neil Cottle of Dunedin, yesterday renounced them.
Mr Cottle said directors should do the decent thing and either reduce the price of the issue or cancel it.
The prospectus advises that high fuel prices and foreign exchange volatility makes "any forecast for the current financial year difficult to make with a high degree of accuracy."
But it adds: "The directors consider that the prospects of the Air New Zealand Group will provide a sound result in 2001 based on existing business initiatives and the significant opportunity represented by the company's acquisition in June 2000 of the remaining 50 per cent shareholding in Ansett Holdings."
Investors are now asking what changed so dramatically between October 6 and Wednesday to justify the lower profit forecasts.
In that time, jet fuel costs rose by just 30c, from $US40.60 to $US40.90 a barrel. The Business Herald understands that Air NZ directors learned last week that Ansett's performance had deteriorated markedly in September and that that was the main factor behind the downgrade.
Sir Selwyn last night said that Air NZ would not reduce the price of the rights issue or cancel it.
But Air NZ has contacted at least two Sydney analysts and advised them to further reduce their forecasts for this year's profit. The analysts had cut their forecasts by 40 per cent after the annual meeting to an average of $140 million to $145 million.
"They have been talking the market down even further to $100 million to $140 million," one fund manager told the Sydney Morning Herald.
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