A haircut looks likely for Geneva Finance investors when the rejigged finance company makes its sharemarket debut amid a near-meltdown in the sector.
As part of a capital restructuring plan, 15 per cent of the company's $98.42 million in debenture holders' funds and 55 per cent of $11.5
million in note holders' funds have been converted into new shares.
The rate of conversion is one share for 36.49c, a figure arrived at on the basis of the company's net asset backing at May 1 this year. Following the conversion, the company now has 76.9 million shares on issue including the 13.28 million held by Geneva's sole shareholder Financial Investments and Holdings Ltd before the restructuring.
However, given the current climate for finance companies and Geneva's recent problems, the shares are likely to trade at a steep discount to the value suggested by the conversion price when they begin trading on the NZAX alternative market this morning.
"It's not going to be skyrockets in flight afternoon delight," said broker James Smalley of Hamilton Hindin Greene.
Smalley said at least some Geneva investors would look to recover at least a fraction of the money owed to them by selling their shares but he did not expect significant volumes of trades.
Geneva chief executive Shaun Riley said he hoped shareholders would wait until the company produced financial results in September before deciding whether or not to sell out of the stock.
The last couple of weeks have been woeful for the finance company sector, with three companies, Dominion Finance, St Laurence, and NZX listed Dorchester Pacific saying they were likely to default on their obligations to investors.
However Riley said the recent round of problems was concentrated on property development financiers. Geneva was a consumer finance firm where the outlook was not quite so bleak.
"We are exposed to changes in economic conditions and it's all a bit tough out there for people at the moment with rising food prices and things like that [so it's] too early to tell if that will have an impact. What's more important for us is changes in employment numbers."
Geneva yesterday said it had appointed two new independent directors Phillip Bell and Robin King.
