NZF Group (NZF and NZF010)

[minimoke]

Couple of points guys ....

The market cap is about $12m - if $12m of noteholders convert to shares (by not elected to convert to the new deal) - the company becomes a $24m company with 50% owned by the noteholders. ($12m is 60% of the $20m of notes).

Pay attention, guys ... this is important.

If $8m of holders elect to take up the new deal on the 24th of February ... this means that $12m of holders will convert to shares.

The company has until about the 1st of March, or so, to decide:

"Do we let these non-election holders convert to shares (at potentially "Death Spiral" prices) or Do we pay them out in cash?". This decision has to be made by the company before the 1st, or so, of March.

A holder, electing to convert to the new deal, is making a mistake (6% does not compensate for the subordinated risk). However, the company is "trying it on" - any one with a risk adverse attitude will elect to convert and will be contributing subordinated money at a ludicrous rate.

Those less risk adverse souls have a chance of getting cash - especially if they are prepared to play hardball.

How are we looking now Enumerate. Todays trades having a bit of an impact.

If we take your $12m converting to shares I'm now getting noteholders with 154m shares against current shares of 76.6m. This suggests existing shareholders loose control of their company.

Taking the new VWAP into account I get a new SP of $0.027.
Alternatively if I add the $12m back in the SP lifts to $0.08.

If we take NZF's announced 29.8% note renewal rate I get;
- a new SP of $0.024
- or with the $14m added back in $0.08.

I'm not sure the Directors were expecting a dropping SP / VWAP over the 28 day period. So hows your Death Spiral looking?

So, this is the mechanism for busting the "death spiral" - after the election date but before 10 days before maturity - if you have elected to convert to shares, they can redeem your holding in cash.

So, the proper "death spiral" predator will:

1) Elect to convert to shares
2) Wait until 10 days before maturity (hoping for light volume on the VWAP)
3) Within the 10 day window to maturity (also within the 20 day VWAP calculation interval) and then dump high volumes of shares on market to drive down VWAP.

Bottom line: if you want cash - convert to shares and be prepared to play hardball in the establishment of the conversion VWAP.

[minimoke]

How are we looking now Enumerate. Todays trades having a bit of an impact.

If we take your $12m converting to shares I'm now getting noteholders with 154m shares against current shares of 76.6m. This suggests existing shareholders loose control of their company.

Taking the new VWAP into account I get a new SP of $0.027.
Alternatively if I add the $12m back in the SP lifts to $0.08.

If we take NZF's announced 29.8% note renewal rate I get;
- a new SP of $0.024
- or with the $14m added back in $0.08.

I'm not sure the Directors were expecting a dropping SP / VWAP over the 28 day period. So hows your Death Spiral looking?

Been out of the loop on this for the past week and not sure if I have all the data but now looking at 81.6% rolling over their notes.

I get a new VWAP of $0.0685
or an SP of $0.029 or with the $3.68m conversion adding back in, an SP of $0.056.

The directors strategy has seen them loose around half the value of their company in the pasty month or so and noteholders who convert to shares will be looking for a spot on the board given they will now be around 42% of the total shareholding.