Air New Zealand's recapitalisation package, announced yesterday, will see the Government take a controlling stake in the carrier through a combination of loan and equity.
An agreement with Ansett Australia's voluntary administrators has also been reached that will wipe the two airlines' potential liabilities to each other.
Thepackage is in two parts. The first, expected to be completed by October 19, involves:
* A Government loan to Air New Zealand of $300 million. The interest rate will be at the 90-day bank bill rate plus 4 per cent (currently about 9.3 per cent) with the interest payable on repayment of the loan.
* A payment to Ansett of $A150 million ($183 million) to settle potential claims by the failed Australian airline against Air New Zealand. In return, Air New Zealand will relinquish claims against Ansett of $A160 million in inter-company loans.
* The balance of the Government's loan will be used by Air New Zealand for working capital.
The second part, expected to be completed between December and January next year, involves:
* Air New Zealand repaying the loan with interest by issuing convertible preference shares to the Government. The parties expect the shares to be issued at 24c, although they could be priced lower. They will carry a fixed cumulative dividend of 5 per cent a year and will have full voting rights. They will convert on a one-for-one basis on January 1, 2005, or earlier at the Government's discretion. They won't be listed before conversion.
* The Government paying up to $585 million for new ordinary shares in the company. The price paid will be determined after due diligence, but could be higher or lower than 24c.
* The reclassification of the A and B shares into one class of ordinary shares.
The company's major shareholders, Brierley Investments and Singapore Airlines, are not contributing to the recapitalisation.
Air New Zealand's annual meeting, scheduled for October 30, will be deferred and combined with a meeting, probably in late December, to approve the recapitalisation plan. Brierley and Singapore have indicated they will support the deal.
