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Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:11 am

Straits Times Singapore (English)0

NZ government may take '80% stake' in Air NZ

It plans to inject up to $725m under new bail-out plan but is not keen to holdits stake for the long term, report says

By Rebecca Lee

THE New Zealand government may take a majority stake in Air New Zealand (Air NZ) worth up to NZ$1 billion (S$725 million) to prevent it from collapsing, but has ruled out a long-term shareholding.

Yesterday, Radio New Zealand reported without citing sources that the government may take an 80 per cent stake by injecting up to NZ$1 billion as a rescue plan announced last month falters.

This stake would be sold to the public through a share flotation eventually, it added.

An announcement of the revised bail-out plan could come as early as this morning, Reuters reported.

Air NZ was struggling before the Sept 11 terrorist attacks in the United States sent the global airline industry into crisis and the government is under intense pressure to ensure the carrier does not end up like the kiwi - a flightless bird.

Radio NZ did not give details other than saying the new rescue plan will include a payment to the administrator of failed Air NZ unit Ansett Holdings for part of the A$400 million (S$355 million) of benefits claimed by its 15,000 employees.

Finance Minister Michael Cullen, replying to questions in parliament yesterday, also hinted that the government will take an equity stake in the national carrier.

At the time of the earlier plan unveiled on Sept 13, Air NZ shareholders Singapore Airlines (SIA) and Brierley Investments did not want their stakes diluted and preferred a government loan to a government shareholding, he said.

But 'that changed when it became apparent to the board that more equity was needed more quickly than the Sept 13 agreement envisaged', he said in transcripts obtained by The Straits Times.

He added that 'the government does not see itself as the long-term shareholder in the company'.

Air NZ said on Tuesday that a final proposal was to be announced 'within the next 48 hours'.

'We are close to finalising agreements...It will be very clear that SIA and Brierley are not beneficiaries of the changed relationships,' Dr Cullen also said yesterday.

The government has already offered to lend the debt-laden carrier up to NZ$550 million under the Sept 13 recapitalisation plan, where SIA and Brierley would each inject NZ$150 million for fresh equity.

But analysts and Brierley chief executive officer Greg Terry said the NZ$850 million plan was no longer sufficient, given the dismal state of the global aviation industry following the Sept 11 attacks.

Yesterday, SIA shares closed 25 cents, or 3 per cent, higher at $8.55 on prospects of a Kiwi government bail-out for Air NZ. But dealers said the price gain may be short-lived as it could be a technical rebound after a recent selldown.

When contacted, neither SIA nor Brierley would comment on the latest reported government bail-out plan.

But sources said SIA still maintained its stance of not putting in more than the NZ$150 million agreed under the earlier plan.

Brierley's Mr Terry last week also made it clear that his company, which was pulled into the red as a result of a US$168 million (S$298.7 million) write-down over Air NZ, will inject more capital only if it enhances the value for its own shareholders.
Anyone can fly, only the best Soar.
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:18 am

Air NZ rescue will see state take control

By Terry Hall in Wellington
Published: October 3 2001 20:30 | Last Updated: October 3 2001 22:12

The New Zealand government is on Thursday expected to unveil a rescue package that will see Air New Zealand revert to state control after an injection of up to NZ$1bn (US$408m).

Michael Cullen, finance minister, did not disclose details in parliament on Wednesday except to say the package would not be beneficial to Air NZ's major shareholders, Singapore Airlines and Brierley Investments.

Singapore-based Brierley Investments owns 30 per cent of Air NZ while SIA has a 25 per cent stake. Both have been widely blamed for contributing to the airline's financial problems that culminated in last month's collapse of former subsidiary Ansett Australia.

The government is expected to buy 80 per cent of Air NZ. Shareholders of the remainder, are mainly New Zealand-based investors who may be asked to contribute to a cash issue.

Analysts believe the expected massive issue of new shares to the government could dilute the combined shareholdings of SIA and Brierley Investments to around 10 per cent. The shrunken holding could prompt Brierley Investments to sell out.

The government has said it is a reluctant shareholder, and is investing in the national interest and will re-sell the stake as soon as possible after the airline returns to financial health.

Political sources say that Mr Cullen is determined to reach a full and final settlement with the Ansett Australia administrator so that Air New Zealand can begin its new corporate life without an unknown liability to the 16,000 former Ansett staff. The sources say the government is prepared to pay NZ$250m to settle with the workers.

Jim Farmer, the Air New Zealand chairman, denied media reports that chief executive Gary Toomey and a number of other executives were to be sacked as part of a massive shake-up. He said Mr Toomey and his team were working towards restructuring the company.

He did not comment on other reports about job cuts of up to 10 per cent of the workforce and the axeing of a number of flights to the US.

Anyone can fly, only the best Soar.
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lindy field
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:21 am

Well, that won't create much incentive for the ANZ management to mend their ways...
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:25 am

It's been confirmed this morning:

From ABC News Australia:

NZ Govt offers airline multi-million dollar bailout package

An New Zealand Government $885 million bailout package has been announced for the ailing carrier, Air New Zealand.

Part of the Government's rescue plan will see a settlement payment to the Ansett administrators of $A150 million.

The Government injection of funding into Air New Zealand will be in the form of a $300 million loan and a $585 million equity investment.

The arrangement will leave the New Zealand Government with an 83 per cent stake in the airline.
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:28 am

Good morning to you, and goodnight from me and the UK!
Anyone can fly, only the best Soar.
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:42 am

Well, at least it has been settled finally!!!!!!!

Air New Zealand can now get on with rebuilding itself.
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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 7:52 am

FINALLY something is being done!
Where will the NZ govt get this 80%? are they buying out BIL, and SQ?

What lindy field is true, ive always said it is the govt that put Air NZ in this situation, but the board does need to shape up.

At least we wont see Air NZ going down the drain like SR!!

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RE: Rumour: NZ Govt. To Buy 80% Of ANZ

Thu Oct 04, 2001 8:38 am

The Government is injecting capital into the airline. They are not buying anyone out. The result is of course dilution of existing shareholders, such that SIA will hold just over 4%, and Brierlies just over 5%.

Here's a good article from (Television New Zealand):

Toomey survives in Air NZ mop up


Air New Zealand's financial rescue involves the government putting in $885 million in total - and Chief Executive Gary Toomey keeping his job.

The deal is subject to shareholder approval at the airline's annual meeting, now delayed until December. But the way it is structured means the airline gets an immediate $300 million from the government as a commercial loan attracting interest of 9.3% at current rates.

That $300 million is to be converted to into preference shares before the annual meeting, but Air NZ Acting Chairman Jim Farmer says those shares will not be voting shares at the meeting and the whole deal with regard to the share issue remains subject to shareholder approval.

However, he added that once the $300 million is advanced ( as a loan) it is non-retractable. Straight away $182.6 million of it is to be funnelled off to Ansett's administrators as part of a settlement agreement.

The remaining $117.3 million will be used by Air NZ as working capital. Meanwhile the government has agreed to indemnify the airline for "certain liabilities" until it gets the money.

The second tranche of $585 million will give the government new equity (shares) in the airline.

Calculations show the government if its puts in the full $885 million at 24c per share, would end up owning 83% of the airline.

Subsequent dilution means Singapore Airlines ends up with 4.3% and Brierley Investments with 5.2%. Neither are injecting new capital under the rescue plan and have agreed to hang on until January 31, 2002.

The price for shares covering the first $300 million of taxpayer funding has been set at 24 cents a share. The price for shares covering the $585 million is to be negotiated by the airline board and the government after due diligience and independent appraisals.

Finance Minister Michael Cullen said later that in the event the share price for the second tranche is lower than 24 cents, the lower price will become the price paid for the convertible preference shares.

The trading suspension for Air NZ shares is expected to be lifted for Thursday afternoon's session, "after the market has had time to digest the information". The As and Bs last traded at around 40c before the suspension was placed at the airline's request on Friday.

Under the recapitilisation plan the airline will have only one class of ordinary shares.

Ansett settlement

Air NZ says it has reached an agreement with Ansett's voluntary administrator to pay $A150 million in settlement of claims against it.

It return it will relinquish claims of $A160 million against Ansett's assets.

In addition two senior Air NZ managers in association with Singapore Airlines are working with the Arthur Andersen administrators to help restructure Ansett for a commercially viable future.

The airline's Acting Chairman Jim Farmer said Chief Executive Gary Toomey is keeping his job. Toomey was not present at the media conference called to make the announcement.

Farmer said Toomey was busy getting on with the job of running the airline. His team is working on a plan for the restructuring and reconstitution of the company.

Farmer refused to talk about operational changes and possible redundancies. His media minder, David Beatson, said that was not Farmer's role, nor the right time. Any restructruing plan needed the sign off from the airline's board.

Sir Selwyn Cushing resigns

Air NZ's board will be slimmed down from 13 to 8. Former Chairman Sir Selwyn Cushing, who's actions Farmer described as "impeccable", resigned from the board overnight on Wednesday.

Farmer said he is staying on in an acting role and fellow director Ralph Norris, Sir Ron Carter and Liz Coutts are also staying as independent directors.

Others on the board will include Wellington QC Bill Wilson, who is chairman of BIL Assets NZ and Singapore Airline's Chief Executive Dr Cheong.

Two further members are to be appointed by the board. Farmer said one of those is retired PricewaterhouseCooper's director Roger France, who has played an active role in the rescue package negotiations.

Farmer said the second will be known in about a week. And he conceded that while legally both will be board appointments, they will be there to represent the Crown.

Farmer said the recapitilisation agreement will allow Air NZ to start a process of recovery from the severe setbacks it has suffered on several fronts.

Rebuilding the airline's reputation in Australia, its key market, is vital Farmer said.

Published on Oct 04, 2001

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