By PAM GRAHAM
Tranz Rail breached Stock Exchange listing rules by not telling investors about writedowns after a June 27 board meeting last year, the exchange's Market Surveillance Panel said yesterday.
At that meeting, the board discovered that the size of the company's asset writedowns would be substantial, but it did not
reveal the information to the market until prompted by a Stock Exchange query on July 4.
Between June 4 and June 27, Tranz Rail's share price fell from $2.91 to $2.58. The decline accelerated after the board meeting, the shares falling to $2.31 by July 4.
The $148 million to $170 million of writedowns were fully disclosed on July 23.
The panel is not taking further action on the matter.
It was also considering whether directors knew about asset writedowns or a lower profit before major shareholders Wisconsin Central and Fay Richwhite sold out in February and March last year.
The company's share price started falling from March 19 and the panel received a complaint from a shareholder and the Shareholders' Association.
The insider-trading aspect of the complaint was referred to the Securities Commission. Tranz Rail said in December that the commission had not notified it of any insider-trading inquiry.
The panel said Tranz Rail's board was not receiving monthly reports in a consistent format in the latter part of the year to June 30, 2002, when it was selling assets, restructuring, changing its chief financial officer and decentralising accounting functions.
Directors did not become aware until June 28 that the profit, excluding abnormal items, for the year to June 30 would fall well short of forecasts.
The panel said it could find no evidence to indicate that the directors knew about the issues which resulted in the writedowns and the reduced profit (relative to forecast) before the share sales.
"The financial reports available to the directors, together with the due diligence material provided to the potential purchasers of the interests of the major shareholders ... during mid to late 2001, do not contain any information additional to, or inconsistent with, that eventually released to the market, and we have seen no evidence to indicate that any such information was supplied to potential purchasers or the major shareholders."
The panel accordingly found Tranz Rail had not breached listing rules in relation to these issues.
