Stock takes: Doing the splits has its dangers

The proposed split up of Guinness Peat Group has some worried about what it could mean for investors who own capital notes issued by the company's New Zealand financing arm GPG Finance.

GPG has made it clear where shareholders stand if the deal goes ahead - investors will receive one share for each of the two companies.

But nothing has been said about those who are owed $426 million in capital notes listed on the New Zealand debt market.

John Hawkins, chairman elect of the New Zealand Shareholders Association, says he is concerned about the position of the noteholders.

"If you split the business the security [of the notes] is suddenly dramatically changed."

Hawkins says the company may be forced to pay the capital noteholders back early which could come at a huge cost to the business.

But Bryan Connor, general manager of corporate trusts at Guardian Trust, which acts as trustee for the noteholders, says it's too early to say what the split might mean.

"We haven't looked at what it means yet because no one has given us the detail."

He said a lot of legal work would have to be done before the deal could go ahead and it was likely the company would have to have a meeting for noteholders.

Connor said GPG was an unusual company in that it was based in Britain but its financing arm was a New Zealand company and it used the money raised in New Zealand to fund the business globally.

Of the $426 million owed, $76 million is due to be paid back in December 2013 and $350 million will mature in November 2012.

BUY-UP

GPG independent director Ron Langley has taken advantage of a dip in the share price to nearly double his shares in the company. Langley paid A52c per share to buy 360,000 shares last Friday and another 640,000 on Monday.

His total number of shares now sit at 1,968,000. A spokeswoman for Gary Weiss said the share buy-up showed a vote of confidence in the proposed separation proposal.

But New Zealand investors are unlikely to agree, with most remaining unconvinced of the merits of the deal.

Weiss has said he is open to modification of the proposal.

GPG shares closed yesterday unchanged at 64c.


REACHING OUT

The placement of South Island rich-lister Allan Hubbard's financial assets into statutory management and Serious Fraud Office investigations has some worried about the wider impact on New Zealand's capital markets.

McDouall Stuart's John Kidd says Hubbard's primary investment vehicle, Hubbard Churcher Trust Management, is an active participant in the local equity markets with holdings in at least 75 of the 150 companies listed on the NZX.

Hubbard Churcher has also been a strong and consistent supporter of local early-stage companies - a layer of the local capital markets that is very thin in New Zealand.

"The equity capital access for New Zealand companies will inevitably suffer from the action being taken against Hubbard," Kidd predicts.

The move is widely expected to have an impact on South Canterbury Finance's capital raising which it urgently needs to come through to ensure its survival.

Kidd says if South Canterbury were to fail it would be a severe financial blow for the finance company sector - not to mention taxpayers' wallets.

It would also potentially eliminate another source of non-bank funding for Kiwi companies and could have a broader impact on the South Island's economic recovery.

TAXPAYERS IN DARK

The spirit of openness has not spread to all SOEs when it comes to reporting pay for chief executives.

While the Government is demanding greater transparency from the taxpayer-owned businesses, not all are keen to follow the laudable trend to lift secrecy on top pay.

Notable exceptions include Solid Energy which indicated that chief executive Don Elder received $1.3 million in 2009, and also gave a breakdown of his pay. Mighty River Power's annual report stated that chief executive Doug Heffernan received $1.2 million last year, but gave no breakdown.

Other SOEs including New Zealand Post and Genesis Energy merely listed their highest income bracket, and indicated that one employee earns a salary in that range.

Genesis Energy public affairs manager Richard Gordon would not disclose the staff member paid $1.6 million in 2009, the publicity-shy Albert Brantley.

"It is a private matter between the individual and the board of Genesis Energy," Gordon said.

Asked how the company justified paying an individual that amount when it reported a loss of $136 million last year, Gordon said: "Genesis Energy's remuneration for its senior executives is based on benchmarking salaries with comparable companies operating in the New Zealand market" adding that the loss was mainly due to asset write-downs.

New Zealand Post was another keen to keep secret the details of who received the top dollar, a spokesman saying the company would consider changing its reporting of its chief executive's salary details only if requested by its shareholders.

RETIRING SHARES

A mystery seller has disposed of around 24 million shares in retirement village operator Ryman Healthcare this week.

The stake was just below the 5 per cent threshold where it would have triggered a substantial shareholder notice.

Some suspect the seller was Tainui's business arm which at last count had 22,500 shares or 4.5 per cent.

But others are more convinced that it was Canadian-linked.

Ryman's biggest shareholder is Canada's Gardiner family at 13.8 per cent but another smaller shareholder is Calgary-based Alberta Incorporated with around 4.9 per cent or 24,950,000.

Other major investors include Ngai Tahu on 8 per cent and the Hickman family with 7 per cent.

Frank Aldridge, managing director of Craigs Investment Partners which handled the retail marketing of the shares, was staying mum on the seller but said the shares had sold well in what was proving to be a tough market.

Ryman's share price has fallen in the wake of the sale. Shares were trading at $2.12 before the block trade and were down at $2.05 yesterday.

ON HOLD

Broker McDouall Stuart is still waiting on approval to become an accredited NZX advising firm more than three months after applying.

The Wellington-based firm dropped out of handling direct trading and settlements in March because it said the position was no longer viable under the new clearing house expected to go live before the end of July.

Last Friday NZX's market supervision said the firm had applied to become accredited and it would advise the market when and if McDouall Stuart Securities became accredited after receiving enquiries about the firm.

McDouall Stuart managing director Andrew McDouall said the delay was "frustrating" as it had only expected the process to take a couple of weeks, given its previous accreditation.

McDouall said the company's shareholders had pumped more capital into the business and restructured it to meet conditions.

He said only one condition, which he would not name, remained outstanding and he expected it to be fulfilled within the next few weeks.

WAITING FOR THE DEAL

A $60 million one-off hit on SkyCity's profits because of tax changes announced in the Budget has not fazed investors.

The casino and hotel owner revealed the impact of changes to the company tax rate and building depreciation this week.

The impact will nearly halve its profits for the year to June 30 which it forecasts will range between $136 million to $140 million before the one-off.

Shares rose after the statement but market sources say all eyes are on what the Australian Government is going to do in response to a wide-reaching gambling review.

Australia's Productivity Commission handed a report to the Government four months ago recommending a A$1 limit per bet be imposed on poker machines as well as a mechanism that allows gamblers to set the time and maximum loss they will take prior to sitting down at the machine.

But so far the Government response has been very forthcoming.

This week it announced it would set up a joint commonwealth, state and territory committee to analyse the recommendations.

The report is believed to be weighing on the share prices of all Australian casino operators. SkyCity owns casinos in Adelaide and Darwin.

Yesterday its share price closed up 2c at $2.94.