NZF Group (NZF and NZF010)

[Enumerate]

Next milestone is about the 1st of March - with the company having to decided to convert the non-electors to shares or to pay them out in cash.

Of course the VWAP calculation to the conversion price consists of trades up to the 15th of March.

[Tony Two Gloves]

Yes sorry Enumerate I mis read the Trust Deed, so it is the 20 business days prior to maturity date (15/03/11) which means the calculations would have started on the 15/02/2011, I don't think it has traded above 0.10 since then and the last few days at 0.06, so at this stage the average is looking like a price os somewhere around 0.08 - 0.09. Interesting couple of weeks ahead...

[Tony Two Gloves]

Wow that was quite a jump in renewals, looks like all that talk of no dividends etc has worked.....

NZF Group Limited (NZF) Capital Notes - Extension of Notification Date for
receipt of Election Notices of NZF Capital Notes (NZF010) As at 24 February 2011, the level of acceptances for the "Renewal Option" on NZF Capital Notes was 81.6% by amount and in light of the Christchurch earthquake impacting on the mail system (not to mention the massive impact on the lives of its residents), the Trustee has agreed to extend the Notification Date for receiving Election Notices from 5pm 24 February 2011 to 5pm 10 March 2011. The branch of the Registry managing the NZF Capital Notes maturity (Link Market Services) is based in Ashburton, whose mail system routes via Christchurch.

[Enumerate]

Market cap at current price is about $4.6m ... at the present conversion rate, about $4m would be tipped into equity. This level of dilution is probably acceptable to directors. It is unlikely that a new controlling block would emerge from the noteholders.

There is still a chance of a cash payout to be determined by the company on the 1st of March. Of course, if you had a cash payout offer on the 1st, you would be extremely unlikely to convert to the new notes any time from the 1st to the 10th.

All this changes if the VWAP average hits 1cent ....

[Enumerate]

Has anyone thought that the possible "financial partner" who is doing due dilgence may be a future buyer for all the shares?

Greentea raised a serious point ... (that I dealt with sarcastically - and he has not returned - apologies for this Greantea - please post again).

[Xerof]

All this changes if the VWAP average hits 1cent ....

yup, right on the knocker there Enumerate

If memory serves me right there was one large holder of these notes, a Wellingon based sharebroker, so I'm guessing they hope to avoid enflaming the death spiral

[Greentea]

No offence taken, just following the chat, over 80% shows many favour their chances with the long term prospects of the company. Is there a register of note holders it would be interesting to see if this is like the shareholding of the company a few major players and a smattering of rats and mice?

yup, right on the knocker there Enumerate

If memory serves me right there was one large holder of these notes, a Wellingon based sharebroker, so I'm guessing they hope to avoid enflaming the death spiral

[Enumerate]

The other major gap in information is that we do not understand, at all, the proposed "partnership" (reference the due diligence a couple of weeks back).

The only thing that was announced was the Pero real estate franchise ... there is no reason to do due diligence on NZF, for this.

I think the imperatives are:

1) Expand the "tier 1" capital - for compliance with the new capital adequacy rules; and
2) Rationalise major shareholdings - some probably want "out"

The questions are: "Who wants "in"?" and "What is the shape of the deal?"

[Enumerate]

If I had a suspicious mind (which, clearly, Alan knows is very far from the truth) I would think that this extension of the election date for the new notes ties in with potential delays in getting a signed deal with this shadowy new "partner".

The logic goes like this:

Premise:
1) Clearly, there are great advantages to the company in having the noteholders roll over to the new notes
2) Clearly, even modest note conversion to equity at current prices promises uncomfortable existing holder dilution

Proposition:
If a new partner transacts a significant part of existing company equity, on market (say, by buying out one of the existing equity holders) this price will dominate the VWAP used for the conversion calculations. A high VWAP minimises dilution thus maximising the return for existing significant equity holders.

The weakness in this logic, from the point of view of the new partner, is that the rapid decline in market capitalisation (because of the "Death Spiral effects) is actually good for their negotiation position. The lower the "market" capitalisation goes, the weaker the negotiation position to demand a significant premium to market value.

I wonder if this scenario is playing out in the smoke filled boardrooms?

I wonder if this explains the companies uncontrolled enthusiasm for having noteholders elect new notes?

Of course, not having a suspicious mind, I do not give any of these scenarios much thought.

[Alan3285]

If I had a suspicious mind (which, clearly, Alan knows is very far from the truth)

Yet more irrational optimism Enumerate.

Please do try to curb your enthusiasm, and blind trust in the exercise of their fiducial responsibilities by all directors.

Tuh!



Alan.