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Enumerate
07-03-2010, 09:01 AM
Mainly interested in discussing the NZF Capital Notes (NZF010).

Any interest in this discussion?

QOH
07-03-2010, 03:13 PM
I own some but admit I didn't really do my homework on them. Can you tell me if they are repayable next year or do they convert to shares ? The yield on them seems too good to be true assuming NZF lasts until next year.

Enumerate
07-03-2010, 06:16 PM
Can you tell me if they are repayable next year or do they convert to shares ? The yield on them seems too good to be true assuming NZF lasts until next year.

Yes, they mature on the 15/3/2011. The company may elect to either pay back the face capital ($1) or convert to shares based on a VWAP type calculation. (Details are in the Trust Deed - accessible on www.companies.govt.nz).

Your point about the amazing yield is also an interesting observation (they have been trading between $0.50 to $0.75 of face value).

The recent S&P rating, at B, does not allow NZF Money to continue with the government retail deposit guarantee. The main reason for this is the weak capitalisation of NZF Group, the holding company. The company has an S&P rating, by the deadline - they have until some time in October to recapitalise NZF Group to BB, to continue with the guarantee. (At BB the guarantee is expensive - 1.5%).

NZF is largely bank funded, has avoided massive property development losses, has a major backer (Huljich), minimal related party loans, and has exposure to property through retail 1st mortgages.

My personal feeling is that this company, with decent capitalisation, will be a candidate for a banking license.

QOH
07-03-2010, 06:57 PM
Thanks enumerate, I guess they will issue shares instead of paying it back then. That will teach me to do my homework. I had assumed they were just an ordinary debenture. Having said that NZF have always treated me well when I've been a debenture holder, I hope they do survive.

Jaa
08-04-2010, 09:38 PM
Yes, this is true - that is why they are Capital Notes instead of debentures. The value of conversion is by a typical 95% VWAP of the 20 days prior to maturity date. Maturity date is 15/03/2011.

Remember, current market capitalisation of NZF is about $15million. There are over $20million of NZF Capital Notes.

My current view is that:

1) if the companies situation were to remain the same as the current situation - they would find roll over or repayment a better option compared with replacing current dominant shareholders with capital noteholders. They are profitable at existing levels of debt - they need to increase capitalisation well before the maturity of the capital notes.

2) if the company were to get into trouble ... this is the classic death spiral situation - in which capital noteholders become the new owners and existing holders would be wiped out.


Hi Enumerate, thanks for your response. Thought I had better continue this discussion in the right place.

Unlike you, I assumed the worst case that the notes will be converted into shares in March next year. You are right that this would leave the current bondholders owning ~58% of the company with an effective entry price of 11 cents a share. The shares last traded at 20 cents, their all time low. Though the only bid at the moment is at 4 cents!

A few points/questions:

1) Are the NZF010 notes covered by the government guarantee until October?

2) Studying its business units, the company does show promise. However they seemed to specialise in low-doc mortgages (especially Finance Direct) which I would assume can't have gone well for them over the last couple of years?

3) If we extrapolate from their interim report and their Jul-Dec 09 profit of $2.6m to get a normal full year profit of $5m this would give their 20 cents shares a P/E of 7.3 on the combined capitalisation (Shares and Converted Notes) or a P/E of 4.1 for the notes at 0.55714. Half of these $5m in earnings comes from non interest income aka fees so should be fairly stable.

4) Any idea of the size of their KiwiSaver book? Trail commissions on this in the future will be substantial if they are indeed being paid trail commissions which is the industry norm. Hulijch may well decide to buy out the company to save this cost and to secure what must be one of their key distribution channels?

5) Where I expected weakness, I found strength in that their impaired loans actually improved by $1m in the last half year. Can this number be relied upon?

6) What do S&P see that we don't to have rated them a B (Outlook Negative) in Feb this year?

Anything else I am missing?

Enumerate
09-04-2010, 04:24 PM
1) Are the NZF010 notes covered by the government guarantee until October?

No, they are Capital Notes - not retail "non-bank" deposits

2) Studying its business units, the company does show promise. However they seemed to specialise in low-doc mortgages (especially Finance Direct) which I would assume can't have gone well for them over the last couple of years?

Not true ... they are 1st mortgage specialist and they fund these mortgages with bank loans, not publicly issued debentures. Where do you find reference to "low doc" loans - I thought they were careful lenders.

3) If we extrapolate from their interim report and their Jul-Dec 09 profit of $2.6m to get a normal full year profit of $5m this would give their 20 cents shares a P/E of 7.3 on the combined capitalisation (Shares and Converted Notes) or a P/E of 4.1 for the notes at 0.55714. Half of these $5m in earnings comes from non interest income aka fees so should be fairly stable.

I agree ... with banks withdrawing from the mortgage market, I would have thought there would have been growth prospects. They also indicated that they would diversify into insurance.

4) Any idea of the size of their KiwiSaver book? Trail commissions on this in the future will be substantial if they are indeed being paid trail commissions which is the industry norm. Hulijch may well decide to buy out the company to save this cost and to secure what must be one of their key distribution channels?

I believe they act as an agent for Huljich Wealth Management - hence they do not directly have a Kiwisaver book.

5) Where I expected weakness, I found strength in that their impaired loans actually improved by $1m in the last half year. Can this number be relied upon?

It is the application of IFRS accounting standards to potential mortgage "break fees" - they were very conservative in accruing the potential loss, which never eventuated and hence the write back.

6) What do S&P see that we don't to have rated them a B (Outlook Negative) in Feb this year?

The mortgage business does not need an S&P rating - it relies solely on bank money. It is only the consumer finance arm (NZF Money) that raises public money through debentures that has applied for the S&P rating. They pointed out the thin capitalisation of the parent group as being an issue. They further made the point that margins were thin. What can you say ... yes, I would like thicker margins and higher equity capitalisation, as well.

Anything else I am missing?

Main risk is if the banks withdraw the funding lines to the parent - NZF Group. I would see selling part of NZF Money as a solution to the credit rating issue with the consumer finance arm. A JV with Rabobank would go down nicely ...

Bottom line is that these guys have been ignored by the market. They are in the Huljich sphere of influence. This is good news as far as I am concerned ... it means NZF Group has a seriously wealthy backer with the insight to survive the GFC. The beat up on Peter Huljich, which we have covered in another thread, is further evidence of the resentment and envy that drives the industry. If you are weakened by bad decisions - you score points by trying to tear down those that are strong.

I have my eyes open ... but I am comfortable about the risk/reward the NZF010's present. I have even bought a few NZF ords to gain access to the NZF AGM.

Enumerate
27-05-2010, 08:07 PM
NZF have announced a series of Residential Mortgage Backed Securities - each issued with a S&P credit rating and mortgage insurance.

I think this is a very good development. Further, I think this market could develop a nice niche for NZF as the packager and enabler of direct NZ investment into NZ mortgages. There is life (and brains) in the NZ Finance sector! Perhaps those interested in the security of NZ residential property will now be tempted by a financial instrument that collateralises this debt, directly. The Aussie banks have been making out like bandits in this sector - nice to have the opportunity to have a piece of this market ...



NZF Group Limited launches NZD$100 million RMBS's

26 May 2010

(NZF) - NZF Group Limited launches NZD$100 million Residential Mortgages Backed Securities (RMBS).

NZF Group Limited (NZF) would like to announce the launch of its first RMBS, a NZD$100 million NZF Mortgages Series 2010-1 RMBS. This transaction will be the first RMBS issue in New Zealand since late 2007 and will feature a pool of seasoned residential mortgages, all with 100% mortgage insurance cover.

Westpac Institutional Bank is arranging the deal and is the lead manager.

Details of the NZF Mortgages Series 2010-1 RMBS are:

Securities Issue Amount (mil.) Preliminary Rating
Class A1 NZ$87.8 AAA
Class A2 NZ$9.1 AAA
Class B NZ$2.5 AA-
Class C NZ$0.6 N.R.

Alan3285
28-05-2010, 03:49 PM
NZF have announced a series of Residential Mortgage Backed Securities - each issued with a S&P credit rating and mortgage insurance.

I think this is a very good development. Further, I think this market could develop a nice niche for NZF as the packager and enabler of direct NZ investment into NZ mortgages. There is life (and brains) in the NZ Finance sector! Perhaps those interested in the security of NZ residential property will now be tempted by a financial instrument that collateralises this debt, directly. The Aussie banks have been making out like bandits in this sector - nice to have the opportunity to have a piece of this market ...

Hi Enumerate,

I haven't got my head around these, and it appears others are confused too:

http://www.nbr.co.nz/article/nzf-group-launches-100m-mortgage-backed-securities-123631

What would I actually be purchasing? Are they loans to NZF that are secured by the mortgage charges over properties?

Thanks,

Alan.

Enumerate
28-05-2010, 04:55 PM
My only information is what you read in the press release. I am presently digging into the Trust Deed:

http://www.nzf.co.nz/Shareholders/Docs/Market%20Announcements/2010/20100526_NZF_Mortgages_2010_Trust_Details.pdf

It seems that they are baskets of mortgages - on loans from NZF to the mortgagee, rated by an NZF grading and this grading is verified by S&P. You are purchasing a form of collateralised loan obligation - which is secured by a basket of mortgages - with insurance on the mortgages. I assume the insurance is provided by Westpac.

S&P AAA is investment grade.

Enumerate
31-05-2010, 03:02 PM
NZF announces their full year results:

http://file.nzx.com/000/957/3758957.pdf



NZF’s four key operating segments all showed strong returns to profitability; the most notable of
which were the Home Loans and Property Finance Divisions, which contributed $4.345 million and
$1.021 million respectively to the audited profit from trading operations for the year.


An overall loss, for the year, was declared after writedowns of goodwill:



Goodwill impairment testing indicated that the carrying
amount of goodwill allocated to NZF’s 50% Joint Venture Investment in MPMH Limited exceeded its
estimated recoverable amount by $6.975 million. The Directors have accordingly accounted for this
impairment loss in the financial statements, which has resulted in NZF reporting a retained loss of
$4.596 million for the year attributable to equity shareholders.


Since the goodwill write down is not a cash loss, this is probably a good time to take the write down. I assume that from a tax viewpoint this allows 30% of the operating profit to be maintained. While overall assets go down - maximum cash is maintained in the company.

All in all ... a solid result.

invessi
01-06-2010, 12:14 PM
Enumerate, each NZF residential loan is insured by Tower, if a specific loan went into default and the property was sold in mortgagee auction say, any shortfall would be covered by Tower and paid to NZF, Tower would then look to the borrower to recover that cost. This is an added bonus to RMBS institutional investors (the RMBS issue is not available to the public).

In my view, NZF have turned the corner, thanks to very cautious directors and board members with many years of experience (the two executive directors drive a commadore and a subaru, they are not flash Harry's!), expect some ramping up with new equity and jv activities!

Enumerate
01-06-2010, 01:44 PM
Invessi, thanks for the information.

I note the Herald coverage, this morning ... http://www.nzherald.co.nz/financial-services/news/article.cfm?c_id=43&objectid=10648785

Talk about putting a bad spin on things ... frankly I would be happy if they wrote off all goodwill ... it has no cash consequence and would improve the tax situation. The Herald also fixates on Huljich, when there are much more significant lines of revenue. It is like business journalism being written by gossip columnists. I must admit, the only thing I read, regularly, in the Herald is the Gaynor column (wife reads the MacNamara art column).

Herald coverage notwithstanding - I too believe that NZF will power ahead. I have some shares but see the most value in the Capital Notes NZF010 ...

invessi
01-06-2010, 02:07 PM
Enumerate, why do you prefer the Capitol Notes, is it because they may convert to shares at maturity?

For existing NZF shareholders, particularly those that got in early or have been bottom feeding over the past year or so, I think there could be some nice surprises, NZF is starting to look attractive to other corporate players who want to take advantage of the lack of competition due to lack of lenders, John Callaghan has already eluded to jv possibilities in the RMBS arena. Recapitalisation of the finance company would be a plus because they have done very well with that division in the past however, the on balance sheet residential loan book is where the big money could be. You may not have picked it up from previous NZF news releases but they are also a long way down the track to developing the same transactional software that Kiwibank use. From what I have observed, NZF have a very experienced and loyal team with very few changes in personnel over the years, particularly the senior lenders, investment management and accountants.

I agree, the press have never had a balance when it comes to reporting on NZF, they look for any negatives and highlight them without saying much about what is good about the company.

invessi
01-06-2010, 02:26 PM
This was posted by Bob Day on his web site today .............."NZF (like a number of others involved with property, they don't believe those nasty bottom lines should get quite as much attention paid to them as some, like me, pay, but they're also hoping those bottom lines will become worthy of reporting very soon) "

winner69
01-06-2010, 04:30 PM
... frankly I would be happy if they wrote off all goodwill ... it has no cash consequence and would improve the tax situation.

Generally such things are not tax deductable

has no cash consequence but affects the equity figure which can sometimes affect key ratios

Alan3285
01-06-2010, 08:31 PM
Generally such things are not tax deductable

has no cash consequence but affects the equity figure which can sometimes affect key ratios

Yeah - my experience has been that goodwill amortisation is non-deductible. There may be exceptions I guess?

Alan.

COLIN
01-06-2010, 10:05 PM
Enumerate: Thank you for your various detailed posts and your erudite analysis of the current position with NZF - a much superior assessment to what I have seen produced by our rather abysmal financial press, if I might say so. The recently-announced results are worthy of detailed study, and distinguish NZF from a large swathe of their lesser-endowed peers. I even bought a few more of the NZF010's, back in April.

One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically? I suppose I could find out the answer, if I rooted around long enough, but I thought you might have it at your finger tips. (I tend to agree, though, that they might seek to roll over, and/or refinance elsewhere, rather than dilute the current ownership).

LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.

Enumerate
02-06-2010, 10:56 AM
Enumerate, why do you prefer the Capitol Notes, is it because they may convert to shares at maturity?


I do not believe that it is inevitable that the Capital Notes will be converted to shares. I do not think there is the necessity to massively dilute existing holders. The company is meeting the interest payments ... and is showing an operational profit. It is out of the retail deposit government guarantee scheme - which is a good thing in my view - and will maintain it's margin on lending with source funding from it's bank partners.

Enumerate
02-06-2010, 11:02 AM
One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically?


It is a classic discounted VWAP calculation: 95% of the weighted average of the shares traded 20 business days before the test date.

Oops, you have done the research ...



LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.

Another reason to have a little stockpile of shares bought cheaply ...

Enumerate
02-06-2010, 11:17 AM
Generally such things are not tax deductable
has no cash consequence but affects the equity figure which can sometimes affect key ratios


I think there is a difference between the new IFRS requirements to report values based on fair value (for example, goodwill) and not to allow internally generated goodwill to be recognised. Since this is goodwill associated with a part owned investment asset (MPM) and not an internal, wholly owned, element - I'd say that there is the possibility of the write down having tax implications (for the positive, in the case of a write down).

Further, given this occurs at an annual review of asset values - I think this may be the correct interpretation. All will be revealed when we see the full accounts.

I think that under the old NZ GAAP - it was possible to slowly amortise this goodwill. I do agree with the point that concern about equity levels and triggering banking covenants, etc. may be something to carefully investigate.

invessi
03-06-2010, 10:43 AM
Enumerate: Thank you for your various detailed posts and your erudite analysis of the current position with NZF - a much superior assessment to what I have seen produced by our rather abysmal financial press, if I might say so. The recently-announced results are worthy of detailed study, and distinguish NZF from a large swathe of their lesser-endowed peers. I even bought a few more of the NZF010's, back in April.

One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically? I suppose I could find out the answer, if I rooted around long enough, but I thought you might have it at your finger tips. (I tend to agree, though, that they might seek to roll over, and/or refinance elsewhere, rather than dilute the current ownership).

LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.

The shares in NZF are tightly held which creates its own problems, an increase in shareholders could be a good thing! A merger or takeover of a like company could also be a good thing!

NZF are going to roll out a comprehensive range of insurance products shortly of which they are the underwriter of premiums, this could go well for them given that they have built in distribution through Mike Pero brokers/insurance writers and the brokers/insurance writers who agregate through NZF. The other advantage they have is that a lot of general insurance writers are either retiring or not wishing to go through the new education process, this should widen the market for NZF.

Enumerate
03-06-2010, 03:12 PM
BTW - I looked at last years accounts filed at the Companies Office (still waiting for this years). The Goodwill changes were recorded on the income statement - which is good news for the use of the write down to offset tax, in my view.

Invessi, you point out the insurance product diversification ...



NZF are going to roll out a comprehensive range of insurance products shortly of which they are the underwriter of premiums, this could go well for them given that they have built in distribution through Mike Pero brokers/insurance writers and the brokers/insurance writers who agregate through NZF. The other advantage they have is that a lot of general insurance writers are either retiring or not wishing to go through the new education process, this should widen the market for NZF.


This is important news ... to me it speaks of a a company willing to invest in the NZ financial services sector and to innovate (cf the recent Residental Mortgage Backed Securities issue). I think your point about other companies retreating from the market also applies to a wider set of financial services. If they can sort the capitalisation issues - the future should be very bright.

invessi
04-06-2010, 11:32 AM
BTW - I looked at last years accounts filed at the Companies Office (still waiting for this years). The Goodwill changes were recorded on the income statement - which is good news for the use of the write down to offset tax, in my view.

Invessi, you point out the insurance product diversification ...



This is important news ... to me it speaks of a a company willing to invest in the NZ financial services sector and to innovate (cf the recent Residental Mortgage Backed Securities issue). I think your point about other companies retreating from the market also applies to a wider set of financial services. If they can sort the capitalisation issues - the future should be very bright.

This is the person who heads up the new insurance program -

Dave Shatford Dip P Fin Plan(Waikato) – General Manager Investments and Insurance
Dave moved to his current role in July 2007 from GM Distribution for NZF mortgage and insurance broking division New Zealand Mortgage Finance Limited (NZMF). Dave has a wealth of experience in investments and insurance from the 32 plus years he spent in the financial services industry. His specialist insurance knowledge came from his senior management roles at Aon (where he ran Aon’s life insurance distribution area) and before this AMP, where he was in the life insurance business development area, his last role being National Manager Broker Distribution. Prior to this he spent over ten years in ANZ Bank’s funds management division, initially in administration and marketing management roles, prior to going abroad for an extended period. On his return to New Zealand in 1993 he was appointed as a Financial Planner with ANZ Funds Management and later as ANZ’s Financial Planning Manager; in charge of systems, audit, training and development of ANZ’s Investment Advisory Service and personnel. Dave joined NZF when Approved Mortgage Brokers Limited (where Dave was CEO and part owner) merged with NZF subsidiary NZMF. Dave started his career with the ANZ in 1977, where he held a number of senior and managerial roles over the 23 years he worked there, including residential and commercial lending, credit control, marketing, administration, investment and insurance.

Dubdee
08-06-2010, 12:53 PM
I would be very surprised if amortisation of goodwill was deductible for tax. What i think you have been looking at are the company accounts not the tax accounts. In company accounts goodwill etc is normally expensed over say 10 years in the operating accounts but wil not be in the tax accounts. This would suggest that the company accounts understate tax due. There may be a tax reconciliation somewhere which take the company Profits, adjusts for all these sort of items, and comes up with actual tax payable.

invessi
15-06-2010, 01:32 PM
NZF
15/06/2010
GENERAL

REL: 1417 HRS NZF Group Limited

GENERAL: NZF: NZF closes its inaugural NZ$100m issue

15 June 2010

NZF Group (NZF) closes its inaugural NZ$100m issue of New Zealand residential
mortgage backed securities (RMBS).

NZF Mortgages Series 2010-1 Trust, arranged and lead managed by Westpac, is
NZF's first RMBS transaction and the first RMBS transaction in New Zealand
since 2007.

Details of the notes are:

Note Class Issue Amount (NZ$m) Rating (S&P) Estimated WAL (Yrs) Pricing (3m
BKBM Bid +)
A1 87.8 AAA 2.7 175
A2 9.1 AAA 2.7 260
B 2.5 AA- 5.0 Undisclosed
C 0.6 NR 5.0 Undisclosed

The transaction was built around strong reverse enquiry from a small group of
institutional investors. NZF have retained a portion of the notes to support
the transaction.

The notes are pass-through securities that will be repaid as (borrowers make
principal payments on their mortgages/the trust receives principal from the
underlying borrowers). The transaction is therefore a key fundi
ng tool for
NZF, allowing the duration of funding to be aligned to that of the underlying
mortgage loans.

The transaction further diversifies NZF's funding base and frees up NZ$100m
for future loan origination.

The notes are backed by mortgage loans to 348 borrowers, secured by 403
properties that are located in New Zealand. All loans benefit from mortgage
insurance provided by Genworth Financial Mortgage Insurance Pty Limited.

Key characteristics of the loan pool include:
- weighted average loan size of $286k
- weighted average seasoning of 28.9 months
- weighted average loan to value ratio (LVR) of 73.4%
- 73.4% principal and interest
- 64.5% fixed rate
- 41.8% low documentation loans to self employed borrowers.

ENDS

For more information please contact:
John Callaghan Tel (09) 520 9350 or 021 346 262.

Malcolm Lindeque
For and on behalf of the board of directors
Company Secretary
NZF Group Limited
End CA:00196126 For:NZF Type:GENERAL Time:2010-06-15:14:17:11

Enumerate
15-06-2010, 06:40 PM
This is very good news. It means that NZF can write mortgage business in $100million dollar blocks and fund this through ready demand in the wholesale market.

I note the BNZ has issued $425million of covered bonds - also with an AAA rating:

http://www.nbr.co.nz/article/bank-new-zealand-sells-first-covered-bonds-124620

I think this development is really very good. Rather than fund the NZ mortgage market at junk levels through the carry trade more power to NZF to package the high quality debt in a manner that allows Banks and Financial institutions to treat it as Tier-1 capital.

NZF is innovating. Further, I think we can look for stellar performance from this company as the recovery strengthens.

It seems absurd that the NZF010s trade at the same level as the SCF010s. I suppose people are worried about conversion into NZF shares. However, I think the RMBS deal means that it would be highly unlikely NZF would choose to issue heavily discounted shares in satisfaction of the maturing NZF010s.

invessi
16-06-2010, 08:35 AM
NZF Group's $100 million residential mortgage backed securities offer has closed, with institutional investors' strong interest encouraging the financial services firm to aim for another issue later this year.

NZF Group's offer of the securities was the first of its kind in New Zealand since 2007. The $100m offer includes $87.8m of AAA-rated notes, backed by a package of 403 properties and mortgage loans to 348 borrowers.

Managing director John Callaghan would not name the investors who bought the notes, but said residential mortgage backed securities (RMBS) were in demand from institutional investors. "There are investors looking for AAA products and quality RMBS. This offer is really about re-establishing the RMBS market in New Zealand."

NZF Group's offer was a "plain vanilla mortgage book offer" that was easy for investors to understand. RMBS had fared well in both New Zealand and Australia during difficult economic conditions, he said.

The offer's non-rated and AA- rated notes were held by NZF Group as the firm still had an interest in this type of product, he said.

NZF Group provides a range of financial services including home loans, consumer loans and debentures. It is also half-owner of Mike Pero Mortgages with Australian specialty finance group Liberty Financial.

NZF Group, formerly New Zealand Financial Holdings, posted a $4.6m March year loss, writing off close to $7m on its Mike Pero investment. This came after ratings agency Standard & Poor's assigned NZF Group subsidiary NZF Money a B rating for both its short and long-term debt in February, citing its "weakly capitalised parent".

COLIN
16-06-2010, 09:55 AM
This is very good news. It means that NZF can write mortgage business in $100million dollar blocks and fund this through ready demand in the wholesale market.

I note the BNZ has issued $425million of covered bonds - also with an AAA rating:

http://www.nbr.co.nz/article/bank-new-zealand-sells-first-covered-bonds-124620

I think this development is really very good. Rather than fund the NZ mortgage market at junk levels through the carry trade more power to NZF to package the high quality debt in a manner that allows Banks and Financial institutions to treat it as Tier-1 capital.

NZF is innovating. Further, I think we can look for stellar performance from this company as the recovery strengthens.

It seems absurd that the NZF010s trade at the same level as the SCF010s. I suppose people are worried about conversion into NZF shares. However, I think the RMBS deal means that it would be highly unlikely NZF would choose to issue heavily discounted shares in satisfaction of the maturing NZF010s.

Bought another 30k today, at 57%. I think its a steal. Unfortunately someone else beat me to the 30k which was offered at 60% - was that you, Enumerate?

Enumerate
16-06-2010, 12:03 PM
- was that you, Enumerate?

Too slow ... I rely on the ASX to be open for liquidity.

invessi
17-06-2010, 02:07 PM
This was posted today on the Bob Day website "He said the notes were backed by mortgage loans to 348 borrowers, secured by 403 New Zealand properties. All loans had mortgage insurance from Genworth Financial Mortgage Insurance Pty Ltd."

I noted in an earlier post on this blog that Tower insure the NZF Group Mortgages, please note that Genworth were the primary insurer but Tower are the insurer going forward, I would expect primarily because Tower are behind the new NZF insurance products for brokers to distribute initiative!

winner69
18-06-2010, 07:48 PM
Good to see NZF innovating Emunerate but don't you get the heebie greebies when the same things that essentially caused the GFC seem to be coming back into favour big time .... even reports today that Wachovia are back in the market with RMBSs

The rating agencies got heaps of flack about how they rated these things and things don't seem to have changed much.

The top tiers of the NZF issue are rated AAA. The profile of the underlying mortgages looks impressive with numbers like weighted average LVR of 73% suggesting pretty safe etc .... but then again 42% of them are low documentation loans .... hardly highly rated securities .... but when you bundle them up hey presto the ratings agency give them a AAA rating

Yep and just the circus of a few years ago all these things are insured as well ..... and just maybe there are heaps of other derivates driven from the same pool of mortgages and bonds. No doubt many prepared to take the extra few points of returns

At least NZF as the originator get the money up front so prob OK for them

Enumerate
18-06-2010, 09:48 PM
There are major differences between the US RMBS market and the Australia/New Zealand markets.

- there is a limitation in liability to the security asset, in the US - in NZ, you can be bankrupted
- "low doc loans" in NZ/Australian parlance means loans to the self employed who "auto certify" their income stream; in the US "low doc loans" means the person has pulse ... maybe
- this is loan syndication up - to banks and financial institutions; the US case was syndication down to the wider finance sector.

As you point out, the risk is now with the purchasers, not NZF. However, this is not a "stitching up" exercise. I think this may be the way NZF as a "packager" and "enabler" of prime, first mortgage loans raises the capital to fund those loans. It seems like a sustainable and profitable business, to me.

All this simply justifies, in my mind, that the NZF010s, at 60%, are too cheap.

invessi
21-06-2010, 10:20 AM
Good to see NZF innovating Emunerate but don't you get the heebie greebies when the same things that essentially caused the GFC seem to be coming back into favour big time .... even reports today that Wachovia are back in the market with RMBSs

The rating agencies got heaps of flack about how they rated these things and things don't seem to have changed much.

The top tiers of the NZF issue are rated AAA. The profile of the underlying mortgages looks impressive with numbers like weighted average LVR of 73% suggesting pretty safe etc .... but then again 42% of them are low documentation loans .... hardly highly rated securities .... but when you bundle them up hey presto the ratings agency give them a AAA rating

Yep and just the circus of a few years ago all these things are insured as well ..... and just maybe there are heaps of other derivates driven from the same pool of mortgages and bonds. No doubt many prepared to take the extra few points of returns

At least NZF as the originator get the money up front so prob OK for them

Winner 69

NZF have not done low doc for a very long time however, as you point out, they are insured (insured by GE) so thats why they get an AAA rating. GE are still insuring new home loans for NZF and QBE also (not Tower as I mentioned in an earlier post).

minimoke
23-09-2010, 07:26 AM
You pop away for a while and some things change - while others don't. Hopefully Enumerate is still around as I'm a bit lost on where to post yesterdays events. NZF Sp takes a 50% hit down to an all time low of $0.10. Enumerate and I couldn't see eye-to-eye on Peter Huljich in the Huljich Wealth Management Thread but yesterdays news once again touches the Kiwisaver thread as wells as the SCF and the ALF/ANF threads. It also touches the Local Body election thread - whose voting for John Banks, Director of Huljich and significant holder of NZF (or at least they were when I last looked)?

minimoke
23-09-2010, 04:31 PM
Nothing like a bit of market manipulation. Just a single $400 trade today to drive the SP back up 100% to $0.20!

Alan3285
23-09-2010, 06:23 PM
Nothing like a bit of market manipulation. Just a single $400 trade today to drive the SP back up 100% to $0.20!

I wouldn't worry about it - just work out what you think it is worth, and how much you want in your portfolio, and buy or sell accordingly.

Most serious traders don't take any notice of such movements when there is no depth / liquidity in a given security.

Alan.

minimoke
24-09-2010, 08:05 AM
Most serious traders don't take any notice of such movements when there is no depth / liquidity in a given security.

Alan.

I'm inclined to agree - I'm not too sure there are too many people interested in this stock - as evidenced by its depth. However where the SP does become important is where a Kiwisaver fund has a substantial holding of a particular stock. The value of that stock will make a real difference to how that KiwiSaver fund reports its portfolio management. And we know that fund performance is then used in the marketing collateral. A $400 investment to double the value of a fund holding is money well spent - unless you are an investor in a Kiwsaver fund which is based on such manipulations.

Alan3285
24-09-2010, 09:27 AM
I'm inclined to agree - I'm not too sure there are too many people interested in this stock - as evidenced by its depth. However where the SP does become important is where a Kiwisaver fund has a substantial holding of a particular stock. The value of that stock will make a real difference to how that KiwiSaver fund reports its portfolio management. And we know that fund performance is then used in the marketing collateral. A $400 investment to double the value of a fund holding is money well spent - unless you are an investor in a Kiwsaver fund which is based on such manipulations.

Not something I had considered!

Alan.

invessi
27-09-2010, 09:50 AM
To the contrary, there is quite a bit of interest in this stock, a lot of watchers waiting on some of the moves in progress to materialise, such as: AGM 22/09/2010 - "The Mike Pero brand continues to be strong in the market place which has
insured that they have been able to maintain its market leader position. A
number of new opportunities are being looked at to increase its presence in
the property sector in New Zealand." Also, expecting another RMBS issue soon and launch of their insurance products!

invessi
11-10-2010, 10:55 AM
NZF’s liquidity risk on mend with RMBS issues
The collapse of some big finance companies recently has been an eye-opener for NZF Group which is now seeking to further reduce its reliance on debenture funding in favour of funding sources like Residential Mortgage Backed Securities.

Tuesday, 5 October 2010
by Sophia Rodrigues

Such a source will not only provide the group with a cheaper source of funding, but moderate the asset-liability mismatches on its books by aligning the maturity profile of the funding with the company's loans.



NZF recently raised $100 million via RMBS issue, earning the distinction of being the first financial institution making the issue since the global financial crisis. The company is now in the process of making another such issue but wouldn't indicate how soon that would be.

NZF used proceeds from the RMBS issue to repay the amount drawn against the term loan facility with Westpac and the balance now stands at around $106 million from $194 million back in March. Westpac has retained the total facility at $225 million and extended the term to October next year.

Meanwhile, NZF has also reduced its reliance on debentures with such funding making up only 15.3% of the group's borrowing from around 22% in March.

As of March, the mismatch in NZF's asset-liability profile was stark with loans over five year-term as per contractual maturity comprising of 62% of total loans taken on an undiscounted cash flow basis. On the other hand, only about 18% are due within one year.

On the funding side, nearly 95% of the funding was due within a year, including the entire term loan facility from Westpac, $20 million of secured notes that are due in February and a majority of debentures.

The RMBS issue would have alleviated this mismatch to some extent and with more such issues planned a further easing in the liquidity risk on the books may be on the cards.

invessi
13-10-2010, 10:13 AM
NZF
12/10/2010 15:47
GENERAL

REL: 1547 HRS NZF Group Limited

GENERAL: NZF: Successfully exit the Crown Retail Deposit Guarantee Scheme

(NZF) NZF Group Limited - Subsidiary companies NZF Money Limited and Finance
Direct Limited successfully exit the Crown Retail Deposit Guarantee Scheme.

NZF Group Limited (NZF) is pleased to advise that its wholly owned subsidiary
(NZF Money Limited) and 70% owned subsidiary (Finance Direct Limited) have
successfully exited the Crown Retail Deposit Guarantee Scheme (RDGS).

The RDGS was established on 12 October 2008 by the Government for a term of
two years, to provide confidence and stability within the NZ banking system
(as well as the non bank sector) at a time of worldwide financial crisis. NZF
Money Limited (NZFM) was one of the first non banks to be accepted into the
RDGS, with Finance Direct Limited (FDL) following shortly thereafter.

While the RDGS achieved its objective of stabilising the market, it also had
the adverse effect of attracting large numbers of investors only seeking a
higher return with a Government guarantee, with absolutely no intention of
remaining long term investors. This put unnatural pressure on cash flows
nearing the expiry of the guarantee.

NZFM and FDL planned out their cash flows and carefully managed their deposit
and lending books to ensure that they could successfully manage the expected
net outflow of investors
that were taking advantage of the RDGS.

NZFM and FDL would like to thank all long term loyal investors that have
remained with them before, during and beyond the expiry of the RDGS.

ENDS

Malcolm Lindeque
For and on behalf of the board of directors
Company Secretary
NZF Group Limited
End CA:00200936 For:NZF Type:GENERAL Time:2010-10-12 15:47:48

invessi
02-11-2010, 10:30 AM
In case you missed it, NZF ran a 3 column x 180cm colour advertisement in the business section of the Herald on Saturday offering depositors 9.25% for 12 months, secured by first ranking debenture stock over the assets of the company, looks like the finance company division is going to fire up again!

minimoke
22-11-2010, 08:35 AM
In case you missed it, NZF ran a 3 column x 180cm colour advertisement in the business section of the Herald on Saturday offering depositors 9.25% for 12 months, secured by first ranking debenture stock over the assets of the company, looks like the finance company division is going to fire up again!
In case you missed it Invessi, one of NZF's Directors , Peter Huljich is now up on criminal charges. The Securities Commission allege he failed to disclose third party loans in offer documents and that he “misled prospective investors by misrepresenting the investment performance of the scheme's funds in offer documents.”. Innocent til proven guilty Invessi but does the news that one of NZF's directors has been accused of such practice fill you with confidence. If it does you are pretty much on your own - theres only one buy bid at the moment and thats at 10 cents which as low as this stock has ever gone.

invessi
22-11-2010, 09:23 AM
Minimoke, I have to say it is regretable that PH has been targeted, there are others far more worthy of prosecution in my view. I am inclined to agree with Phil Macalisters blog this morning on Good returns (below). As to the share price, I don't see that changing much until we get a good news story and they start paying dividends again!

I thought it was worth having a go at trying to defend Peter Huljich. As readers will know the Securities Commission laid criminal charges against Peter Huljich and Huljich Wealth Management (HWM) for allegedly misrepresenting its KiwiSaver funds to the public.

Since this story broke there has been plenty about it including a comprehensive statement from Huljich about what happened. This is detailed elsewhere on Good Returns.

As part of the background Huljich has acknowledged there was a mistake, stepped aside from his role and offered make ups to its KiwiSaver members.

Now the Securities Commission lays criminal charges against him which, if proven, could result in time behind bars.

The so-called victims of this alleged crime haven’t lost money and have been told that if they are unhappy about HWM they can switch to another of the many KiwiSaver providers in the market place – for free.

Here’s the bit I don’t understand – why is the Securities Commission taking this action when there are plenty of other potential cases where investors were deliberately misled; are real victims as they lost money and are now suffering. Secondly, did Huljich really top up the funds without anyone else associated with the business knowing?

I don’t know if Huljich set out to deliberately mislead investors, and unless there is some smoking gun then it would be hard to secure a conviction.

Likewise it is incredibly difficult to believe the Huljich took the actions he did and no one else knew anything about it or raised any objections.

The directors who signed off the accounts should be included in any criminal proceedings the Securities Commission pursues.

So too should Trustees Executors which is both the trustee for the fund, and the fund administrator.

With this latter role the company must have known what happened and approved it. If it had doubts it should have walked across the room and raised it with trustee.

Looking at the 3rd Annual ASSET Magazine KiwiSaver survey it is clear that HWM has done well signing up members.

Indeed our analysis of data shows that HWM was one of the most successful managers in the year to March 31 at signing up new members and had the highest growth in FUM at a whopping 625%.

Yes, justice has to be seen to be done, but again why this case when there are plenty of others where there are actual victims? Is the commission just after a high profile scalp to look good?

You can see why I didn’t follow my father, grandfather and uncle into the legal profession!

This entry was posted on Sunday, November 21st, 2010 at 11:42 am and is filed under KiwiSaver. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

minimoke
22-11-2010, 09:49 AM
Minimoke, I have to say it is regretable that PH has been targeted, there are others far more worthy of prosecution in my view. I am inclined to agree with Phil Macalisters blog this morning on Good returns (below). As to the share price, I don't see that changing much until we get a good news story and they start paying dividends again!

I don't know that he has been targeted - where he is today is where he ought to be. In the Kiwisaver arena there is no one more deserving of charges being laid against them than PH. He's the first to be found out for doing dodgy things so it is only right that his actions be judged by the judiciary to determine if those actions are legally acceptable. Other KiwiSaver providers will be watching closely.

Macalister also has the advantage of hindsight - sure there were no victims. But that was only because he was caught out in time. Sure there are others more deserving - and Sec Comm seems to have its work cut out at them moment - there is no shortage of potential crims who are no doubt in their sights. One of the biggest fish would of course be Alan Hubbard who did the same thing as Huljich - and look where his investors have ended up now. If it wasn't for the Govt Guarantee they would be right up **** creek.

invessi
23-11-2010, 01:14 PM
Oh, there are still buyers and sellers then!

Last VWAP Buy Sell High Low First Volume Value
15 ˘
(NZD)

23/11 13:42 NZT

15 12 15 15 15 8,207 $1,231

invessi
23-11-2010, 01:43 PM
Minimoke

A word to the wise, Feely has his place in our society and it is good to know there are people like him looking out for us but in my observation, people like him are salaried and have their targets to meet and need public support to keep office, nothing new or particularly wrong about that except when their targets are met and their persona are achieved by going after the easy fish, who on a scale of 1 to 10, are maybe about a 2.

This was very evident when they prosecuted Brian Clegg of Clegg and Co, in terms of wrong doing, he was on a scale of about 2, maybe 3, his company was very small, he was trying to balance his covenents between the finance company and capital notes ratios, when a capital notes investor needed an urgent early withdrawal to assist his situation, the covenent was breached (although not greatly) and the trustee pulled the plug, Brian Clegg was then prosecuted albiet they did deals behind the scenes of course to get him to plead guilty! Is this really equitable justice or is it just moving the cards around!

I am sure you and I will know quite a number of disgraced finance company directors and others who are still at large, many of them are still lenders under some newly invented vehicle, some of the most nortorious are part of property lending syndicates, some are asking for a 10% fee up front and charging 17% interest rate.

I am currently reading the "Southern Octypus", this a a book about the inception and growth of our Australasian merchant shipping industry, it was a ruthless and calculating industry, nothing has changed in this country, its all about who has the most influential friends, the most money and the best lawyers, another good book on this subject is lawyers, guns and money by Ian Wishhart.

In my mind, Peter Huljich is the next easy target!

minimoke
23-11-2010, 01:49 PM
Oh, there are still buyers and sellers then!

Last VWAP Buy Sell High Low First Volume Value
15 ˘
(NZD)

23/11 13:42 NZT

15 12 15 15 15 8,207 $1,231

look to me like someone was shouting lunch at the Viaduct and needed a bit of cash to pay for it.

Enumerate
23-11-2010, 07:08 PM
In my mind, Peter Huljich is the next easy target!

I agree. I think the evolution of the SFO along US District Attorney lines is a very unfortunate development. In certain cases this office is an elected position and becomes mired in the political process. I think Feeley has abandoned the NZ character (measured, fair) in favour of some Hollywood "image".

Look at the web site, the key performance indicators emblazoned front and centre:

http://www.sfo.govt.nz/

I wonder if Adam gets confused from his role at Eden Park Redevelopment and believes the SFO is managing some kind of sporting event.

Given the catastrophic collapse of the mezzanine finance sector (how many company failures is it now? how many billion$?) you would have to say the Commerce Commission and the Securities Commission need to be investigated for gross negligence.

If this was expressed in civil engineering terms - we lose all major structures built by Fletcher, Mainzeal and a host of others due to civil works failure; do you think there would be an investigation into the enforcement of the building code (or even a bit of a look at the code itself)? Not in New Zealand - we would put anyone else with buildings that did not fail under the microscope and pursue them with US DA style "prosecution".

I just hope the civil works at Eden Park are up to the mark.

invessi
24-01-2011, 01:31 PM
News!

HOME
SHAREHOLDERS
KIWISAVER
CONTACT


We are pleased to announce that NZF is in the final stages of negotiation with a new business partner which was a strategy announced late last year. Since then we have looked at a number of options and narrowed these to one party which we believe offers the most effective solution for NZF.
We are currently involved in the final stages of the due diligence process and as a consequence we must suspend all new originations from NZF HomeLoans until these negotiations and the necessary due diligence is complete.
This means that we will not be writing any new business for the next few weeks, while this process is being undertaken. All existing loans will continue to be serviced in the usual manner, and for those loans where full solicitor documentation has been completed but have yet to settle, these commitments will be honored.
We will keep you informed once origination can recommence.
This is a very exciting step for NZF, and one that will enable us to grow the business to a scale that under existing structures would not have been possible.
As always, if you have any questions, please give us a ring – otherwise, stand by for further news as it comes to hand.

To contact Scot Bailey -
0800 80 40 70 or e-mail at bdm@nzf.co.nz



As a result of the Unsolicited Electronics Message Act 2007 which came into effect on September 5, 2007, we are required to have your consent to send promotional electronic messages. As you have been receiving information from us in the past, on a regular basis, and have not requested to be removed from our membership database, we infer that you consent to receive similar emails from us in the future. However, if you do not wish to receive future emails from us, please let us know by replying to this message including ‘Unsubscribe’ in the subject line and you will be removed from our database immediately.
This email was sent by: NZF BDM Team, NZF Money Limited, Level 2, 88 Broadway P O Box 1195, Shortland Street, Auckland. Toll Free: 0800 80 40 70 Fax Free: 0800 379 9080 E-mail: homeloans@nzf.co.nz or bdm@nzf.co.nz
Unsubscribe

COLIN
24-01-2011, 08:53 PM
News!

HOME
SHAREHOLDERS
KIWISAVER
CONTACT


We are pleased to announce that NZF is in the final stages of negotiation with a new business partner which was a strategy announced late last year. Since then we have looked at a number of options and narrowed these to one party which we believe offers the most effective solution for NZF.
We are currently involved in the final stages of the due diligence process and as a consequence we must suspend all new originations from NZF HomeLoans until these negotiations and the necessary due diligence is complete.
This means that we will not be writing any new business for the next few weeks, while this process is being undertaken. All existing loans will continue to be serviced in the usual manner, and for those loans where full solicitor documentation has been completed but have yet to settle, these commitments will be honored.
We will keep you informed once origination can recommence.
This is a very exciting step for NZF, and one that will enable us to grow the business to a scale that under existing structures would not have been possible.
As always, if you have any questions, please give us a ring – otherwise, stand by for further news as it comes to hand.

To contact Scot Bailey -
0800 80 40 70 or e-mail at bdm@nzf.co.nz



As a result of the Unsolicited Electronics Message Act 2007 which came into effect on September 5, 2007, we are required to have your consent to send promotional electronic messages. As you have been receiving information from us in the past, on a regular basis, and have not requested to be removed from our membership database, we infer that you consent to receive similar emails from us in the future. However, if you do not wish to receive future emails from us, please let us know by replying to this message including ‘Unsubscribe’ in the subject line and you will be removed from our database immediately.
This email was sent by: NZF BDM Team, NZF Money Limited, Level 2, 88 Broadway P O Box 1195, Shortland Street, Auckland. Toll Free: 0800 80 40 70 Fax Free: 0800 379 9080 E-mail: homeloans@nzf.co.nz or bdm@nzf.co.nz
Unsubscribe

This communication contains information that would seem to be of a market sensitive nature - why then was it not simultaneously released to the NZX?

Alan3285
25-01-2011, 01:51 AM
Awww, come on, don't be harsh.

We're all mates inside-ere.

:-)

Enumerate
25-01-2011, 06:31 AM
Clearly NZF is being "invested in" or "taken over". (Why else would you suspend writing new loans during a due diligence).

Any ideas who the new partner is?

As an exercise - I compared the latest numbers from Dorchester (DPC) to NZF. NZF is in infinitely better shape and yet in normalised share price terms - NZF is a bargain. NZF is also multiple brands - Mike Pero mortgages is such a dominant brand and NZF owns 50% - yet there is not much market consciousness about the significance of MPM.

A new equity partner and a restructure would be a great development.

invessi
25-01-2011, 09:43 AM
Yes, they are a bargain, I think "invested in" is the likely scenario, looks like it might be a new line of bank funding for home loans and the finance company arm, once they get the liquidity ratios right for the finance company, expect to see a investment grade S&P rating! And yes, MPM has been underrated by the market, they are profitable and a great distribution chain, distribution is key!!

Alan3285
25-01-2011, 10:34 AM
Hi Guys,

I have been the NZF010s for some time.

Your comments above are not specific about NZF v NZF010.

Do you see this as positive for both the shares and bonds, or are there negatives for the bonds? I can't see how, but you seem more up with the play on these than I am.

Thanks,

Alan.

Enumerate
25-01-2011, 01:22 PM
Your comments above are not specific about NZF v NZF010.

Do you see this as positive for both the shares and bonds, or are there negatives for the bonds? I can't see how, but you seem more up with the play on these than I am.


It will be positive for both.

NZF shares are under pressure because of the percieved lack of capital adequacy. The basic businesses are under pressure - but are intact and recovering. (This is a near miraculous track record given what has happened to other businesses in the sector).

NZF010 are under pressure because people are fearful they will convert to shares because of the point above. These were selling in volume at 75cents per dollar face - insane (low of 50cents or so). The margin has narrowed, recently. I would love mine to convert to shares at 14.5cents per share - the noteholders would end up controlling the company. However, for this reason, I do not believe that they will convert to shares.

minimoke
25-01-2011, 03:19 PM
Clearly NZF is being "invested in" or "taken over". (Why else would you suspend writing new loans during a due diligence).


I'm wondering if its actually a takeover. I can't figure out why you would suspend new loans if you are the one doing due diligence. It makes sense if your the one subject to due diligence. I'd have thought that a new investor would be encouraged by a growing loan book. And why would you make this statement to people on your email list and not to the market at large - unless you just want to spin a positive yarn to depositors.

Perhaps the share price is depressed because they aren't making a profit. Perhaps its because one of their Directors is up on charges. Perhaps its because their Kiwi saver fund is showing negative returns when pretty much every on else is positive: (their diversified plan is down 5.28% when the average is up 6.36%) Perhaps punters see highs of $1.60 and the are now trending consistently down to $0.14 and wondering if the bottom has indeed been reached - especially now there is no Govt Guarantee golden parachute. Perhaps its because the property market is looking pretty rocky at the moment - reduced lending on falling values)

POSSUM THE CAT
25-01-2011, 06:41 PM
Minimoke Prospectous would be Invalid in my opinion If it did not detail possible changes in ownership.

Enumerate
25-01-2011, 08:15 PM
Trust Mini to make sure every silver lining has its cloud ...

BTW the final year loss is due to a write down in intangibles - MPM is not making as much money as it used to. Operations is profitable.

Huljich and HWM are probably part of the solution rather than part of the problem.

The punters don't seem keen to sell any - the liquidity over the past year has been minimal. There does not seem to be any evidence for a rush to the door.

The government guarantee never applied to the ordinary shares.

minimoke
26-01-2011, 08:31 AM
Trust Mini to make sure every silver lining has its cloud ...
Apologies for that - I guess I tend to see the cloud when thats self obvious. Distinguishing diminishing storm clouds from a smoke screen is often the challenge.


BTW the final year loss is due to a write down in intangibles - MPM is not making as much money as it used to. Operations is profitable.
?? Finance Div -= $1.7m loss, Home Loans 1.7m profit, Finance $0.18 profit, Consumer finance $0.16m loss, management 1.1m loss. Operations actually made a $818,000 interim loss compared with a $2m profit for the previous period.


The punters don't seem keen to sell any - the liquidity over the past year has been minimal. There does not seem to be any evidence for a rush to the door.
There have never been too many punters wanting to buy either. Its a good day if there are more than a couple of buy bids.


The government guarantee never applied to the ordinary shares.
Thats a given. But during the guarantee depositors could support the share price knowing they would get their cash back. We only need to look at SCF to see how a company was artificially propped up. All credit to NZF - at least they are standing on their own two feet.

invessi
27-01-2011, 10:38 AM
NZF
26/01/2011 16:45
GENERAL

REL: 1645 HRS NZF Group Limited

GENERAL: NZF: NZF Group Ltd Announces Maturity options on Capital Notes

NZF
26/01/11
CAPITAL NOTES (NZF010)

NZF Group Limited (NZF) Announces Maturity options on Capital Notes (NZF010).

Letters have been sent to all NZF Capital Noteholders on the register today
for NZF010 Capital Notes that mature on 15/03/2011.

The letter includes an Election Notice, in terms of the Trust Deed
establishing the Capital Notes ("Trust Deed"), and confirms that:

- NZF has elected to provide Noteholders, with the option to renew all of
their Capital Notes on the terms specified in the Election Notice ("Renewal
Option");

- If they do not elect to accept the Renewal Option, then NZF has elected
that it will, on the Maturity Date, compulsorily redeem all of their Capital
Notes by issuing new ordinary shares in NZF in accordance with the terms of
the Trust Deed;

- NZF has elected to not redeem the Capital Notes for cash on the Maturity
Dat
e..

The covering letter, Frequently Asked Questions and Election Notice are
attached.

Capital Noteholders that wish to exercise the "Renewal Option" must complete
and return Election Notices to reach the Registrar (Link Market Services) by
24 February 2011.

Malcolm Lindeque
For and on behalf of the board of directors
Company Secretary

ENDS
End CA:00204900 For:NZF Type:GENERAL Time:2011-01-26 16:45:21

minimoke
27-01-2011, 11:06 AM
So, do we read into that there is no cash and they are looking at a dilution of head shares?

invessi
27-01-2011, 11:14 AM
Well yes, cash is King!

suurin41
27-01-2011, 11:47 AM
I understand that NZF is a high risk, and I am keen to chuck $1,000 into them. My question is what would be a good price to buy them at?

If you don't think I should even be thinking about this, what other NZX/ASX shares could I look at? Am interseted in shares that are currently low but have a chance of increasing (perhaps doubling) sometime over the next few years. I'm guessing this is high risk behaviour. I have been recommended looking into mining exploration companies in the ASX.

Cheers team

minimoke
27-01-2011, 12:31 PM
Well yes, cash is King!
So not good news then. I see active buyers have halved to just one at $0.05. Not really an influential investor -its only $450 worth.

Enumerate
27-01-2011, 05:12 PM
Not a good deal ... 6% with maturity in 5 years for a subordinated debt position behind secured debt yielding up to 9.5%.

These guys must think that the NZF010 holders have no where to go but to roll over.

At current prices, they have a market capitalisation of about $12m. There are $20m of the NZF010 - 60% conversion to shares means that the NZF010 holders will own 50% of the company!

The other intriguing possibility is the fabled "death spiral". They need to be notified of renewal election by the 24th of February. I need to consult my trust deed, but I presume the VWAP of share sales between this time and the date of conversion would be used to establish the price of conversion (possibly less a discount). A predator could drive down the shareprice (market liquidity is almost nil) and convert to squillions of shares for a minimal holding in the notes.

Hmmm ... sounds like fun. Anyone game?

Enumerate
27-01-2011, 05:15 PM
Thinking things through - I wonder if these guys are planning on making a large share transaction at a price significantly higher than the existing price somewhere in the days after the 24th of February? This would weight the VWAP to a market price and eliminate the possibility of the "death spiral".

COLIN
27-01-2011, 10:26 PM
Enumerate: Thank you for your various detailed posts and your erudite analysis of the current position with NZF - a much superior assessment to what I have seen produced by our rather abysmal financial press, if I might say so. The recently-announced results are worthy of detailed study, and distinguish NZF from a large swathe of their lesser-endowed peers. I even bought a few more of the NZF010's, back in April.

One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically? I suppose I could find out the answer, if I rooted around long enough, but I thought you might have it at your finger tips. (I tend to agree, though, that they might seek to roll over, and/or refinance elsewhere, rather than dilute the current ownership).

LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.
Enumerate: Reference your point about the scope for share price manipulation - this is a scenario I foresaw, in my post of 1-6-10 (above), and I can only surmise that they will ensure that "friends" bid up the share price during this period. However, the picture is heavily clouded by the recent "news" (that apparently was passed to depositors, etc., and not to the NZX - without any challenge by the latter!). It really leaves noteholders in the dark and, unless I am missing something, I find the situation totally unsatisfactory.

Enumerate
28-01-2011, 06:32 AM
It really leaves noteholders in the dark and, unless I am missing something, I find the situation totally unsatisfactory.

I agree. I was hoping for better treatment - I would have rolled my notes if the interest rate was appropriate to the risk. Why didn't they offer to convert to secured debt on standard debenture terms (ans: probably for capital adequacy reasons).

minimoke
28-01-2011, 07:42 AM
The other intriguing possibility is the fabled "death spiral". They need to be notified of renewal election by the 24th of February. I need to consult my trust deed, but I presume the VWAP of share sales between this time and the date of conversion would be used to establish the price of conversion (possibly less a discount). A predator could drive down the shareprice (market liquidity is almost nil) and convert to squillions of shares for a minimal holding in the notes.

Hmmm ... sounds like fun. Anyone game?
Or an alternative where holders bid up the price, in an attempt to head off the dilution, which leaves bond holders little choice but to roll over. Either way the trades over the next month will be very telling - theres surely got to be at least one trade in the 20 days

I reckon most holders won't elect to do anything - the paper will sit in the bottom drawer and teh election date will pass them by.

minimoke
28-01-2011, 08:01 AM
Thinking things through - I wonder if these guys are planning on making a large share transaction at a price significantly higher than the existing price somewhere in the days after the 24th of February? This would weight the VWAP to a market price and eliminate the possibility of the "death spiral".
The action is going to start for real after 24 Feb. Either way it doesn't look like bond holders are going to get their money back. On one hand you hang in there for another 5 years at 6% and pray every night that NZF is still around on 15/3/06 or you get converted into ordinary shares at a value yet to be determined. But given the liquidity of this stock it doesn't look like there would be much chance of selling shares as there are so few buyers.

Enumerate
28-01-2011, 09:47 AM
Election Procedures
If the Company has given notice that the Noteholder may renew on new conditions, not later than the date fallig 13 Business Days before and including the Maturity Date, the Noteholder may elect whether he or she accepts the new conditions.


This is date is the 24th of February



If a Noteholder elects not to accept any new conditions offered, then no later than 10 Business Days before and including the Maturity Date the Company (at its discretion) may elect to redeem (by way of payment of cash or by the issue of Ordinary Shares) all of the Capital Notes.


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.

:eek2:

invessi
28-01-2011, 09:55 AM
I find it surprising that no one has commented on the likely effect of converting the bonds to shares, I don't know how many individual bondholders there are but I imagine the conversion will turn around the situation of 75% of the current shareholding being held by company directors, after conversion, we should see a lot more trading activity, particulary as they are in train to bring in a new Australian (I would think) partner/funder!

Colin, you should be thankfull for what you have, it could have been a lot worse!

Enumerate
28-01-2011, 10:03 AM
I find it surprising that no one has commented on the likely effect of converting the bonds to shares,


We did ... right at the start of the commentary:



At current prices, they have a market capitalisation of about $12m. There are $20m of the NZF010 - 60% conversion to shares means that the NZF010 holders will own 50% of the company!


Also, discussion of the "death spiral" is also a de facto discussion on conversion.

In fact, my view now is that conversion to shares is the best path forward.

invessi
28-01-2011, 10:29 AM
I agree, exciting times ahead!

minimoke
28-01-2011, 10:38 AM
In fact, my view now is that conversion to shares is the best path forward.
Isn't that really the only option.
One one hand you can lock your money in at 6% for five years with no guarantee you'll get your money back in 2016 and an environmental where interest rates are sure to rise.

Or by default you end up with a pile of ordinary shares. If thats you're option then you are at the Mercy of those who are going to manipulate the price in that Feb / March period. At the moment you have an $11m company spread amongst 76.6m ordinary shares. At the end of this aren't you still going to have an $11m company but spread amongst a squllion shares?

And the silver lining is?

minimoke
28-01-2011, 10:45 AM
T
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.

:eek2:
I need some help here!.
(1) Bond holder have only been offered one thing - that is to take up 6% to 2016. There is no offer to elect to convert to shares - though this happens by default through inaction on the offer.
(2) A bond holder can only wait -there is nothing else for them to do.
(3) How does a bond holder dump shares they haven't been issued yet. How do you dump high volumes in an illiquid market where there are no buyers (except one current one who is only after 10,000 at $0.045.

If you want cash you surely have to be praying that someone will buy your converted shares but if the price has been driven down low you can't expect much cash can you?

invessi
28-01-2011, 10:48 AM
You have not accounted for the $20m sitting in their finance company book!

minimoke
28-01-2011, 11:10 AM
You have not accounted for the $20m sitting in their finance company book!
I thought I had - isn't that reflected in the value the market puts on the ordinary shares. Their interim report shows total net assets of $12.7m

Jaa
28-01-2011, 12:00 PM
I created a Google Docs spreadsheet last year when I looked at NZF010 in the expectation that they would be converted to shares.

By my calculations noteholders should end up with ~65% of the company if none decide to renew.

I have set it so that anyone can view and edit it. So feel free to play around with different share prices or estimate figures or even improve the model. It factors in the 5% discount.

https://spreadsheets.google.com/ccc?key=0AmxY149UyqSMdFFjdTlMTC1QdEV4QVpxM0ZiYkxnb 2c&hl=en&authkey=CN2h8PkC

Disc: I didn't end up buying any

Enumerate
28-01-2011, 12:26 PM
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.

Enumerate
28-01-2011, 12:32 PM
I thought I had - isn't that reflected in the value the market puts on the ordinary shares. Their interim report shows total net assets of $12.7m

From memory ... and away from my notes ...

In the interim they do not equity account for Mike Pero ... they "value" MPM as an intangible asset. I get a clearer view of things from the full year accounts where they present a combined group view. They had $14m in equity (Group+MPM).

minimoke
28-01-2011, 12:33 PM
I created a Google Docs spreadsheet last year when I looked at NZF010 in the expectation that they would be converted to shares.

By my calculations noteholders should end up with ~65% of the company if none decide to renew.

I have set it so that anyone can view and edit it. So feel free to play around with different share prices or estimate figures or even improve the model. It factors in the 5% discount.

https://spreadsheets.google.com/ccc?key=0AmxY149UyqSMdFFjdTlMTC1QdEV4QVpxM0ZiYkxnb 2c&hl=en&authkey=CN2h8PkC

Disc: I didn't end up buying any
So, if existing shareholders want to retain control of their company (assuming they aren't already bond holders) we are going to have to see the SP move to $0.30. So buying now at $0.18 could be worth a punt. Even buying discounted bonds and ordinary shares now might be worth a punt. Trouble is owning x % of not very much may not be a good move.

Enumerate
28-01-2011, 12:37 PM
So, if existing shareholders want to retain control of their company (assuming they aren't already bond holders) we are going to have to see the SP move to $0.30. So buying now at $0.18 could be worth a punt. Even buying discounted bonds and ordinary shares now might be worth a punt. Trouble is owning x % of not very much may not be a good move.

The other scenario is:

Those that don't elect to take up the new deal will simply be paid out in cash (if the company decides it does not want the dilution and acts before the 1st of March to pay those who have not elected to proceed with the new deal).

minimoke
28-01-2011, 12:45 PM
"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.


Those less risk adverse souls have a chance of getting cash - especially if they are prepared to play hardball.
Where do they get the cash from - they only had $4m in the interim accounts.
As a shareholder what do you do - spend your $4m on bond holders or do you buy up existing stock as treasury stock and return the cash to your self. Or do you spend it on driving up the SP so that more bondholders are needed to get past the 50% ownership threshold.

Enumerate
28-01-2011, 12:55 PM
Where do they get the cash from?

Does it really surprise you that some kind of restructure is currently on the cards - timed for completion some time in February?

Do you really think the current owners will be happy with dilution even if the VWAP ends up a 30cents, as pointed out by Mini ?

They have an opportunity to "try it on" - the more noteholders electing the new deal - the happier they (and their bankers) will be!

Think about how nervous they will be wondering if, between the 1st of March and the 15th, whether a predator has written a contract with major shareholders to sell their entire holding to a standing order in the market at 1cent to be compensated with their shares back plus a fee after the 15th of March.

minimoke
28-01-2011, 02:09 PM
Clearly it is now "game on". What is going to be fascinating as this plays out is who the players are and what they are playing for. Without knowing the game or the players its a bit hard to work out the rules - I'll be on the sidelines with this one.

Jaa
28-01-2011, 02:53 PM
Clearly it is now "game on". What is going to be fascinating as this plays out is who the players are and what they are playing for. Without knowing the game or the players its a bit hard to work out the rules - I'll be on the sidelines with this one.

Thats also the conclusion I came too.

If your not sure whether your playing cricket or rugby you shoudn't be on the field :ohmy:

minimoke
28-01-2011, 04:14 PM
Bit of a tickle today. One more big spender coming in at $0.046 (so thats two eager buyers) and the NZF010 at 125

getontoit99
29-01-2011, 01:15 PM
Hi all.

Been following your discussions on and off for months but now with the company deciding to not redeeem the capital notes for cash, I thought it time to add my penny's worth.

I contacted the company and had a robust conversation with a member of their management team. (Hey, if you can't change anything, at least let them know what you think of it!) What the man said to me was followed up by the e-mail below.



Dear ....

Thanks for your call.

It is important to remember that when we issued the Capital Notes in the world was a different place. As you well know, things began to unravel with three firms National Finance, Provincial Finance and Western Bay forced into receivership. As New Zealand entered recession in 2007, four more were placed in receivership. By the end of that year, the situation had deteriorated with 20 percent of total finance company deposits at risk. With the onset of the global financial crisis in 2008, the number of failed finance companies sharply rose to 48, involving depositors funds of over $6 billion. Throughout this period we have paid the interest due on the Notes on the due dates at all times.

Also at the time the Notes were issued, other factors included:

o The Global Financial Crisis did not occur until 2008
o There was no credit squeeze
o We had a high interest rate environment – at the time the OCR was 7.25%
o We had a highly active and rising property market

There has to be a balance between paying a competitive rate of interest and not causing undue pressure on the issuer. While we would have liked to have offered a higher rate to investors, we believe the Interest has been set at a competitive (3% over the OCR whereas the previous margin was 2.5%), yet manageable level, given our sector challenges and the economy in NZ and Globally, all of which are still in recovery mode. Paying a high interest rate which could possibly put stress on the company is not a responsible action as any failure would obviously lead to a loss on Capital Notes being sustained by investors

In this regard, over the last 3 years there have been many financial service company failures, resulting in Capital Note holders loosing most if not all their money. Over that same period we have paid interest on Capital Notes on time.

As a result of the GFC, Finance sector failures and dramatic slow down in consumer lending, housing market activity and losses, all sectors of our business have been effected, thus preventing us accumulating funds within the group and denying us the opportunity to offer a cash redemption option on the Capital Notes. For the same reasons, finding a funder to provide up to $20m to replace the Capital Notes in this market is simply not possible at the moment. However, we remain committed to finding a replacement facility and are continuing the process.

In summary we believe the rate offered is set at a rate that is competitive, but also manageable for the group in the current environment we are operating and is:

o Double that of the OCR
o Significantly above the rate of inflation (providing a real return to investors)
o Above the rate offered by Dorchester (5%) which is arguably in a similar position in most respects

Capital Note Holders do have the option of not taking the offer of renewal and instead taking the shares, although I am sure they will look at the Hanover/Allied debacle of swapping an investment for equity and the resultant share price. If note holders choose this option then that is their choice, we are simply not prepared to pay a rate which could have a detrimental affect on the Group as a whole.

In regard to our offer to Debenture Holders, this rate is offered by our 100% subsidiary NZF Money Limited and not NZF Group Limited. You have already raised your issues about rates in the market and I have outlined the reasons why the rate was set at that level and while we would like to have set a higher rate, this would not have been prudent in the current environment.

If it is any consolation, (a) your capital remains intact (b) you have been paid interest on time, every time and (c) our intention is to continue to pay interest on time every time for the term of the new Capital Notes.

Kind regards

..............

getontoit99
29-01-2011, 04:57 PM
I'm new at this so any comments or corrections will be appreciated.

If 1/3rd of Capital Notes become shares, and the share price through the 20 business days to 15 March stays at 14.5c:


10,000 notes plus accrued interest = $10,244 (approx.)

This buys 74,230 shares at 13.8c which is 95% of 14.5c.

6.6m Notes converting will create about 47.8 million new shares bringing the total on issue to about 125m.

Dividing the current market capitalisation by 125m gives a new nominal price of 8.9c.


Does this make sense?

Thanks
Scott

FXTrader
29-01-2011, 09:30 PM
The "management" email is more than somewhat misleading regarding the quality of the 6% rate offer for the 5 year investment, as the levels of the resprective OCRs at the time are irrelevant. These are 5 year investments, not 90 day ones. Back in 2006 the 5 years swap was around 7% and the bond yeild at that time was around 3% over that. Today the 5 year swap is above 5%, and the 6% offered rate is less than 1%....frankly it should be above the previous 3% based upon the change in associated credit risk.

Truth is,. he's right, they can't pay that much, but to justify it with references to the irrelevant OCR is near criminal.....I'd much prefer the company was just plain honest and admit we're stuck and they'll pay whatever they think they can get away with.

QOH
30-01-2011, 02:03 PM
I own some of these capital notes, my position is slighlty different in that I bought them at a discount, so if I went with the extension, my yield would be closer to 8%. I was going to accept that however after reading this thread I'm having second thoughts. Would you still go for the shares in my situation?

Enumerate
31-01-2011, 08:24 PM
Does this make sense?


Couple of points:

1) I don't believe that the interest payment is included in the conversion. (Need to read the Trust Deed to confirm this ... but would be surprised if it was "capitalised"

2) If $6.6m of Notes are converted to shares - this amount is deleted as a liability and turned into that other type of liability - equity. Hence the new nominal price would be somewhere between 13.8cents and 14.5cents (as the new shares introduce new equity at 13.8cents).

Enumerate
31-01-2011, 08:45 PM
Paying a margin over OCR is a reasonable way of assessing risk. At the moment with OCR at 3%, it is at an historical low. However, the margin I would want in order to own NZF010's would be north of 6% (and not the 3% offered). The reasons for this are the degree of subordination of the debt and the perception of the market (that demands 9.5% for secured NZF debt over a shorter term).

Make no mistake, converting the NZF010 to the new instrument (NZF020?) will see an immediate discount applied on the secondary market (75cents on the dollar, as a guess).

If you convert to equity (by failing to elect conversion to the new deal) your situation will be:

- No prospect of a short or medium term dividend; and
- A likely "squeeze" on the price of the equity instrument (NZF) and very thin liquidity

Long term, I would suggest that it is likely you will get an exit opportunity at a price closer to $1 face. There is also the possibility that if faced with dilution of "death spiral" proportions, the company will act and exercise its right to pay cash to those holders queued for conversion. This, however, is not a certainty.

I think it was Dirac who said: "You cannot tell the future except as a superposition of relative probabilities".

Those electing not to take the new instrument will end up with a probability of a cash payout but with the more probable ownership of equity at a range of probable prices .... Not a good choice if you are depending on income. Not a good choice if you put capital preservation at the highest imperative. A very good choice, however, if you can deal with the variability and uncertainty of the situation and want to choose the option with the best outcome, on average, over all the likely states.

Enumerate
31-01-2011, 08:58 PM
Final point ...

This new deal, in which it is clear a third party is doing due diligence on all or part of NZF, will clearly be material to the decision Noteholders need to make.

The full scope of the election process has not been put to Noteholders - there has been no mention of the full process including the potential for the company to payout cash to those expecting to get equity.

The point is:

Why is the Trustee not making some inquiries of the company to make a statement to Noteholders?

Would it be unkind to observe that the Trustee is apparently incompetent? Is it more a case of laziness than incompetence?

getontoit99
01-02-2011, 05:55 AM
Couple of points:

1) I don't believe that the interest payment is included in the conversion. (Need to read the Trust Deed to confirm this ... but would be surprised if it was "capitalised"

2) If $6.6m of Notes are converted to shares - this amount is deleted as a liability and turned into that other type of liability - equity. Hence the new nominal price would be somewhere between 13.8cents and 14.5cents (as the new shares introduce new equity at 13.8cents).

Thanks for this. The final interest is included according to the investment statement.

getontoit99
01-02-2011, 06:11 AM
Final point ...

The full scope of the election process has not been put to Noteholders - there has been no mention of the full process including the potential for the company to payout cash to those expecting to get equity.



Thanks for your analysis and comments which are very helpful

However I don't follow your thinking above; I must be missing something.

The investment statement is quite clear. The company has elected to not redeem Notes for cash. Are you suggesting they might change their mind if Noteholders who convert to shares dump them and push the share price way down? Surely this was always a prospect in a situation such as this. Also, there would be howls of "unfair" from Noteholders who chose to hang on to their Notes.

Enumerate
01-02-2011, 07:14 AM
The investment statement is quite clear. The company has elected to not redeem Notes for cash. Are you suggesting they might change their mind if Noteholders who convert to shares dump them and push the share price way down? Surely this was always a prospect in a situation such as this. Also, there would be howls of "unfair" from Noteholders who chose to hang on to their Notes.

In the Trust Deed under a section entitled "Election Process" the company can overturn the de facto choice made by those who will convert to redeem their Notes in cash.

The Trust Deed is here:

http://www.business.govt.nz/companies/app/service/services/documents/C112EB1AB7A805DBD80621FD46EF9B85

The Prospectus is here:

http://www.business.govt.nz/companies/app/service/services/documents/CD9C1CDF0855F3D6549BB29CF38FF780

minimoke
01-02-2011, 07:17 AM
2) If $6.6m of Notes are converted to shares - this amount is deleted as a liability and turned into that other type of liability - equity. Hence the new nominal price would be somewhere between 13.8cents and 14.5cents (as the new shares introduce new equity at 13.8cents).
If the market currently values NZF at $11m (or 14.5c) then what is there about this transaction that changes that value - the equity and liability are on the same side of the ledger. Aren't we then going to see the $11m split amongst 125m shares giving a price of 8.8c?

minimoke
01-02-2011, 07:24 AM
The company has elected to not redeem Notes for cash. Are you suggesting they might change their mind if Noteholders who convert to shares dump them and push the share price way down? Surely this was always a prospect in a situation such as this. Also, there would be howls of "unfair" from Noteholders who chose to hang on to their Notes.
1) It seems to me the company has no cash so the noteholders won't get cash.
2) Noteholders who convert won't be able to dump - to do that requires buyers and there are none. At best there are a couple of current bids at 4.5 / 4.6 for a grand total of approx $11,000


I'm with Enumerate on the Trustees - why do bondholders not have more information upon which to make a decision. It seems we now have an unknown game, with unknown players and unknown rules. It also looks like the coaches are keeping their game plan to themselves - and thats not a winning strategy. As the Pakistanis know, the only winners are the bookmakers.

COLIN
01-02-2011, 09:16 AM
If the market currently values NZF at $11m (or 14.5c) then what is there about this transaction that changes that value - the equity and liability are on the same side of the ledger. Aren't we then going to see the $11m split amongst 125m shares giving a price of 8.8c?

But aren't you overlooking the fact that each dollar of liability that is eliminated is a dollar added to equity? The resultant increased amount of equity is thus spread over the new total of shares.

My whole beef about this circus is that noteholders are flying in the dark, without the aid of radar, compass, GPS or even a basic sextant. Horoscopes are a poor substitute.

minimoke
01-02-2011, 09:30 AM
But aren't you overlooking the fact that each dollar of liability that is eliminated is a dollar added to equity? The resultant increased amount of equity is thus spread over the new total of shares.

Its a subordinated debt for equity swap - but that doesn't alter the gross asset backing. Sure the increased equity gets spread amongst a greater share pool - but that doesn't mean the share price goes up. We've recently seen a similar swap with ALF and look where that share price has gone.

Enumerate
01-02-2011, 09:52 AM
My biggest problem with the new deal is that, at 6%, the option will do nothing for capital preservation. These notes will drop like a stone, in price, in the short or medium term. Even in five years there is no guarantee of a exit - these notes will be an effective perpetual investment at a rate that does not fully compensate for the risks.

There is only one direction for the NZF shareprice up to conversion ... down. There will be some degree of dilution for holders because of this exercise. However, once the new shares are issued, there will be massive downwards pressure as disgruntled noteholders seek to exit an unwanted equity position in an illiquid market. Anticipating this rush to the exit - selling NZF now for buyback after the conversion would be the natural strategy.

Noteholders are also away of these dynamics - and most will probably suck it up and take up the new offer (a known and manageable effective capital loss is better than the unknown and unmanageable).

My personal view is that the finance sector will eventually recover. The shareprice will never see these current levels, again, if the recovery kicks in. So, now is the time to convert to an equity holding - if NZF can pass the fundamentals test at the likely conversion price. At 14.5cents, I am satisfied it does (but I full expect to covert at less than this).

minimoke
01-02-2011, 10:12 AM
Anticipating this rush to the exit - selling NZF now for buyback after the conversion would be the natural strategy.

That would make sense, but as you have pointed out its an illiquid market with essentially no buyers. The two buyers that are there are offering less than Whimp was offering for Vector but the two sellers seem to have your optimism as they have raised their sell price to 18 and 19.

Punters might like to consider how they rate the NZF Directors and management. Are they the same as, better or worse than, say ALF. I see ALF has today hit an all time low of 1.7c. A back of the matchbox assessment would have to rate ALF better - at least they communicated with their shareholders.

Enumerate
01-02-2011, 10:24 AM
A back of the matchbox assessment would have to rate ALF better - at least they communicated with their shareholders.

Come on Mini, you are now being mischievious ...

If you are going to do any comparisons ... DPC is a better choice.

Enumerate
01-02-2011, 10:44 AM
Trouble at mill .... (can only read the NBR headline - must be the Kiwisaver product, I hope)

Mike Pero pulls the plug on Huljich (http://www.nbr.co.nz/article/tuesday-mike-pero-pulls-plug-huljich-nk-p-84706)

minimoke
01-02-2011, 11:33 AM
Come on Mini, you are now being mischievious ...

If you are going to do any comparisons ... DPC is a better choice.
Not deliberately - I haven't followed DPC so can't make a comparison. But didn't DPC have cash to buy back notes and actually kept their holders informed with decent options?

minimoke
01-02-2011, 12:07 PM
Trouble at mill .... (can only read the NBR headline - must be the Kiwisaver product, I hope)

Mike Pero pulls the plug on Huljich (http://www.nbr.co.nz/article/tuesday-mike-pero-pulls-plug-huljich-nk-p-84706)
I guess this follows on from Don Brash quitting them in October.

Enumerate
01-02-2011, 12:08 PM
But didn't DPC have cash to buy back notes and actually kept their holders informed with decent options?

Last time I looked at ALF ... well before the Hanover debacle ... I suggested the code should be ARF (as in arf, arf). You have to say the Allied finance arm was gone ... the Hanover issue simply was an attempt to "fall together" rather than separately "fall over".

NZF is a sound business (albiet with some possible capital adequacy challenges ... that they could address through their RMBS scheme).

I think MPM is a great business ... at the bottom of the cycle. The residential property market cannot get much worse.

I expect strong recovery from NZF and MPM once the recovery becomes evident.

Alan3285
01-02-2011, 12:24 PM
I'm an interested bystander at this point.

Intriguing to note that someone has now jumped in with a bid at 10c (next best is 4.6c) but the spread is still 8c (best sell at 18c).

Still no real depth though (new bid at 10c is only $1,000).

Perhaps someone not wanting to see a trade at 4.6c given where things might go?

Alan.

minimoke
04-02-2011, 01:28 PM
It looks like NZF weren't to impressed with teh 2 February Herald article. In a large para by para response NZF have clarified their position. What is very clear is that Note holders can get cash for their investment. It won't come from the company but from a sale transaction on the secondary market.

I find this somewhat disingenuous - the sale assumes there are buyers and that is not the case for NZF.

winner69
04-02-2011, 03:18 PM
It looks like NZF weren't to impressed with teh 2 February Herald article. In a large para by para response NZF have clarified their position. What is very clear is that Note holders can get cash for their investment. It won't come from the company but from a sale transaction on the secondary market.

I find this somewhat disingenuous - the sale assumes there are buyers and that is not the case for NZF.

...and there will be the 'scumbags' (prob some post on sharetrader) who will bid these down to prices that actually reflect the risk .... and that won't be $ for $ will it

Instead of being 'scumbags' lets do the decent thing and and together and offer a $ for a $ .... dream on

minimoke
04-02-2011, 03:58 PM
...and there will be the 'scumbags' (prob some post on sharetrader) who will bid these down to prices that actually reflect the risk .... and that won't be $ for $ will it

Instead of being 'scumbags' lets do the decent thing and and together and offer a $ for a $ .... dream on
I'd imagine there would be some NZF holders who would be pretty happy if a low ball offer turned up in the mail.

getontoit99
05-02-2011, 09:43 AM
It looks like NZF weren't to impressed with teh 2 February Herald article. In a large para by para response NZF have clarified their position. What is very clear is that Note holders can get cash for their investment. It won't come from the company but from a sale transaction on the secondary market.

I find this somewhat disingenuous - the sale assumes there are buyers and that is not the case for NZF.

The NZ Herald article was full of factual errors and was subsequently extensively edited to correct them.

QOH
05-02-2011, 11:31 AM
Link to another article about unhappy capital note holders .
Being one of these unhappy noteholders myself, am still leaning towards holding on to them, having gone through the ALF fiasco.
Does anyone see a revised offer coming?

http://www.stuff.co.nz/business/market-data/4620489/NZF-investors-angry-over-few-capital-note-options

As an aside does this rumour about Mike Pero going into real estate selling change anything for noteholders?

Enumerate
05-02-2011, 01:55 PM
I wish people would stop being irrational about the NZF Notes - there is no automatic right to convert to cash on maturity - this is a basic fact about the instrument. It is not a pure debt instrument - it carries some of the risk levels of equity.

The fact that the company has chosen to offer a substitute Note is very interesting. They could have opted for a conversion to equity and be done with it.

This talk of the ALF like nature of the equity conversion is even more irrational nonsense. NZF at 13.8cents represents reasonable value.

Don't forget, holders who do not elect to convert might still see a cash payout (as per the Trust Deed). It will be interesting to see if the "Death Spiral" develops - in which equity converting Noteholders get NZF ords at bargain prices.

QOH
06-02-2011, 06:54 PM
Don't forget, holders who do not elect to convert might still see a cash payout (as per the Trust Deed). It will be interesting to see if the "Death Spiral" develops - in which equity converting Noteholders get NZF ords at bargain prices.

When you mention "holders who do not elect to convert " are you meaning holders who accept the terms of the new notes" that they still have a chance of a cash payout, before the new notes mature or at maturity date?

Enumerate
06-02-2011, 07:21 PM
When you mention "holders who do not elect to convert " are you meaning holders who accept the terms of the new notes" that they still have a chance of a cash payout, before the new notes mature or at maturity date?

Yes.

In the Trust Deed, 10 working days before the maturity date (about the 1st of March), but after the election date for the new notes (24th of February), the company can opt to payout in cash rather than convert to shares.

This is a mechanism to avoid massive "Death Spiral" dilution of existing equity holders.

The company has really laid the foundation for a "Death Spiral" by not reinforcing the value of the ordinary shares. They have actually taken steps to diminish the value of the shares by talking about NZF values in the same light as ALF values (which have collapsed and will face a reverse death spiral). The company had a choice of offering noteholders a carrot (rollover on commercial terms - 5 year bank bill swap rate + 3%) or to "use the stick" (offer OCR + 3%; scare holders with the NZF/ALF ordinary comparison).

I expected the former; we got the latter. Now things play out according to the dynamics of the "Death Spiral".

Newman
07-02-2011, 08:30 AM
I tried to place an oder to buy NZF010 notes, but was rejected with a message "This instrument is currently in halt and orders are not being accepted".

The notes seem not allowed to trade on NZDX.

Alan3285
07-02-2011, 09:43 AM
I tried to place an oder to buy NZF010 notes, but was rejected with a message "This instrument is currently in halt and orders are not being accepted".

The notes seem not allowed to trade on NZDX.

I can't see any announcement to that effect on NZX.com.

ASB doesn't show any announcement for NZF010 either.

However, ASB does have a general message up saying that they are, 'experiencing technical difficulties with NZX orders'. Perhaps it is the stock exchange itself that has a problem?

Alan.

Newman
07-02-2011, 12:14 PM
I tried placing an order to buy NZF010 notes again and it was delined. This time the feedback message is more informative: "This instrument is currently in Halt and orders are not being accepted. Market will reopen for this security once election process has been completed."

This proved that the Managing Director of NZF lied to the market by saying that noteholders can cash their notes on the NZDX maket. How can you sell your notes if nobody is allowed to buy?

Alan3285
07-02-2011, 12:25 PM
I tried placing an order to buy NZF010 notes again and it was delined. This time the feedback message is more informative: "This instrument is currently in Halt and orders are not being accepted. Market will reopen for this security once election process has been completed."

This proved that the Managing Director of NZF lied to the market by saying that noteholders can cash their notes on the NZDX maket. How can you sell your notes if nobody is allowed to buy?

Okay - that's odd.

Am I mistaken that I would expect to see a trading halt announced here?

http://www.nzx.com/markets/NZDX/NZF010/announcements?fpage=all&

What is the 'election proces'? Surely they woudn't halt the security for a week or more?

:Confused:


Alan.

minimoke
07-02-2011, 12:27 PM
A back of the matchbox assessment would have to rate ALF better - at least they communicated with their shareholders.
Surely NZF would notify the market of the trading halt? Perhaps we should move this conversation to "NZX is a Joke " thread.
Edit: My Direct Broking account will let me process a buy up to the "confirm" button stage. Obviously I don't want to buy so can't test any further

Enumerate
07-02-2011, 12:30 PM
NZF010 not tradeable until election

Why was this not announced? This entire exercise is turning out be a shabby manipulation of people to convert to the new notes.

The process is deeply flawed if it is not transparent.

You would expect that the Trustee would be across is ....

invessi
07-02-2011, 12:56 PM
"Lied" is a fairly strong word, they may well have had no say in the suspension on trading, the fact is that over the next 5 years, they will be tradeable!

minimoke
07-02-2011, 04:21 PM
"Lied" is a fairly strong word, they may well have had no say in the suspension on trading, the fact is that over the next 5 years, they will be tradeable!
"Lied' infers an intent to deceive. If trading was suspended today and there was no mention or hint of this in the various releases from NZF then this isn't something I'd expect from someone honest.

Tony Two Gloves
08-02-2011, 01:50 PM
I have read this thread and can't seem to agree with the general positivity around NZF and tend to agree with Mini that they are being a little less than honest. I think the major issue is their management team. John Callaghan who is on sick leave was the driving force there I don't think he has been there for over a year now and from what I hear will not return - no market announcement. Richard Waddel their chairman is also very unwell after suffering a stroke and I wonder how long until he is replaced. He has been replaced on the Finance Direct board already as has Callaghan. Finance Direct lost $160K in their accounts to Septemeber and I believe NZF has been trying to sell their stake for some time as they have a less than acrimonious relationship with the minor shareholder. The Pero business is only just profitable after banks reduced commissions and a stagnant property market makes the model difficult. I would suggest the written down brand value based on earnings has more impairment potential. It seems to me all of their business models are broken and reliant on positive sentiment in the financial markets which there is not, they have a lot of issues to resolve and the question is do they have the team to do it?

minimoke
08-02-2011, 03:39 PM
they have a lot of issues to resolve and the question is do they have the team to do it?

Seems the market shares your sentiment. All buyers and sellers in the 010's have dried up. - not a single one on wither side of the trade. So much for holders getting cash by selling. New seller in the heads at 0.09. We know its game on - are these the players lining up their pieces?
Edit - and one less buyer. Seems the market is getting wind of something.

Tony Two Gloves
08-02-2011, 03:59 PM
Not sure, the 0.09 seller is only for a 1,000 so I think the real action is a way off. Will be interesting watching what takes place but am sure the major shareholders will have an agenda....

Alan3285
08-02-2011, 04:08 PM
Seems the market shares your sentiment. All buyers and sellers in the 010's have dried up. - not a single one on wither side of the trade. So much for holders getting cash by selling. New seller in the heads at 0.09. We know its game on - are these the players lining up their pieces?
Edit - and one less buyer. Seems the market is getting wind of something.

I would be surprised if the buyer at 4.5c stays in there (assuming they are paying attention of course).

They might stay, but drop their price I suppose.

Alan.

minimoke
08-02-2011, 04:22 PM
Not sure, the 0.09 seller is only for a 1,000 so I think the real action is a way off.
According to Enumerate (and I'm not doubting him) the value on conversion is the average before conversion date and it there are no sales then the last sale price. So even if just 1000 sell the VWAP will be affected. Its a cheap price to pay if it meets the sellers end ambition. (just like we saw previously with the other small trade - it lifted the SP which makes kiwi saver fund reporting look good)

getontoit99
08-02-2011, 08:32 PM
This entire exercise is turning out be a shabby manipulation of people to convert to the new notes.


Enumerate, I agree that the rate to be paid on the new notes is very poor given the risks and the five year term.

The alternative on offer is to convert to shares. The problems with this are

the shares to date have rarely traded,
there may well be tens of millions of new shares created which is unlikely to be good for the share price even if they do become more liquid.

Sure, the trust deed may allow the company to change its mind at the last minute. Maybe as you have implied, they will decide to redeem notes for cash to avoid a share price collapse and to reduce the number of notes they have to pay interest on. Doing this would be exactly the opposite of their intentions as stated in the election notice, but would appear to be within their rights.

Say the election process results in 30% of the notes heading for conversion to shares. (The company has told me they estimate 30% of notes won't be rolled over to the new conditions.) This would cost NZF $6 million to redeem those notes for cash.

Do you really see this happening? Just to avoid a share price collapse (the death spiral thing we have been reading about in this forum)?

With such thin trading to date, is the low share price, particularly in view of market conditions in the finance company sector, that big a deal in the longer term?

Put another way, do you suggest that note holders elect to convert to shares just in case the company decides to redeem for cash at the last minute?

As a note holder with real money at stake, I'm very interested to hear your views.

Enumerate
08-02-2011, 09:59 PM
Put another way, do you suggest that note holders elect to convert to shares just in case the company decides to redeem for cash at the last minute?


The price of absolute certainty is the new 6% note. This option guarantees a poor return over 5 years, for the degree of subordination and the risk. This choice practically guarantees some short term capital erosion (due to the undesirability of the new notes - which will trade at a discount on the secondary market).

The "punk" option is to choose to play financial "chicken" with the company. This leads to a much more dynamic situation. There are some more positive outcomes (full payout) but there are some negative ones (actual conversion to an illiquid equity position).

If the death spiral scenarios play out - the $6m of converting notes could end up controlling the company. Do you really think the directors want to face a special AGM, soon after conversion, in which the new owners of the company will have a word to say about their shabby treatment in the events leading to their new equity positions?

Which is the right path? My personal guess is much more than 2/3rds of existing noteholders will convert - because they depend on the capital performing to some degree as an income generating asset. Holding on for 5 more years, at 6% - hoping they get paid out - is probably going to be the favored choice.

I, personally, have not made my mind up. However, I am watching with interest the beginnings of a death spiral forming (today, with a small parcel being offered at 12cents and then dropping to 10cents). If it can go to 10cents ... it can go to 1cent ... if it can go to 1cent ... it can go to 0.1cents.

Maybe someone is trying to make a point to NZF directors before "game time"?

minimoke
09-02-2011, 06:51 AM
The price of absolute certainty is the new 6% note. This option guarantees a poor return over 5 years, for the degree of subordination and the risk. This choice practically guarantees some short term capital erosion (due to the undesirability of the new notes - which will trade at a discount on the secondary market).

Either way existing punters are screwed. 6% is a dreadful rate and NZF is surely pulling the piss offering this. You can get over 6% for five years pretty much anywhere with nothing like the risk attached to NZF. Trouble is the punters have their money in there - they are desperately hoping new money comes in, other wise they have no way of extricating themselves.

As at today I figure holders need to value their stake as $0.00 - they have essentially lost 100%. They now need to figure out how they can recoup some of that loss.

The new notes will find their own level and will be heavily discounted - so existing holders can expect to loose between 50 - 100%. (Anything better than a 100% loss requires a buyer and there are so few of those)

As at today their are no buyers at all so lets imagine a best case scenario is a 75% discount. Will holders then elect to convert, what are the chances of them getting a better return on the main board. Virtually nil.

As their share price has dropped away so has liquidity dried up. I doubt theres been $100,000 worth of trades over the past few years - and all of a sudden there is going to be interest in $6m. I don't think so. So holders have to hold on - and they will have a long time to hold - they need to be looking at a five year window and try to figure out when the best chance of flogging either there shares or notes will be.

How noteholders expect NZF to stump up with $6m in cash on conversion is beyond me. They clearly don't have the cash - its not going to happen.

For holders its now about loss minimisation. For buyers its about lotto - working out the odds of bettering your money and having a bit of fun along the way knowing you are at least helping keep the directors in the style in which they have become accustomed.

Tony Two Gloves
09-02-2011, 09:16 AM
Well said Mini I agree whole heartedly.

I suppose for NZF if everyone converts there is quite a decent interest saving of $1,950,000 (9.75% on $20M)per annum or $1,200,000 if everyone rolled over either way should help the bottom line. I think the majority will convert to shares as the best option of a bad bunch, I don't think they have the cash and are in survival mode at present. I wonder how long their banks will tolerate all this and the continued losses?

Tony Two Gloves
09-02-2011, 12:01 PM
This whole thing is so open to manipulation and it will make a huge differnce to the major shareholders depending on what the price end up being. Some quick calcs at 0.045 the major shareholders would go from 75% to approximately 11%, at .1375 cents they would end up at 26%, at .30 cents they would end up at 40%, they would need to get the share parice to over 55 cents to get to 51%. This of course assumes all the $20M covert. I wonder if the major shareholders have some of the notes? I remember seeing a Sunday Start Times aticle with John Callaghan saying he couldn't understand the discount (approx 50% at the time) as it was crazy and he would buy some himself if he was able to but couldn't for legal reasons? I suppose now we can all understand why the market was applying the discount now, gotta love that hindsight!!

Newman
09-02-2011, 03:24 PM
If you hold a large number of notes and intend to convert to shares you should buy a small number of NZF shares when someone tried to sell at 7 cents. This is probably the only available means you can protect your investment.

I am sure if you place an oder to buy NZF shares at 2 cents NZX will decline your order and say "(your) price too far from last traded price".

Good luck guys if you still have NZF010 notes.

QOH
09-02-2011, 08:13 PM
Good to see people's thoughts on the notes. I'm still leaning towards not converting mine, I did buy them on the secondary market so my interest rate will be somewhat better, whether I get my capital back who knows. I will be annoyed if they did decide to pay out in cash to those that converted to shares. That's what I really want, just my capital back.
Did anyone find out if there is still a trading halt on?

Alan3285
09-02-2011, 10:24 PM
Good to see people's thoughts on the notes. I'm still leaning towards not converting mine, I did buy them on the secondary market so my interest rate will be somewhat better, whether I get my capital back who knows. I will be annoyed if they did decide to pay out in cash to those that converted to shares. That's what I really want, just my capital back.
Did anyone find out if there is still a trading halt on?

Did anyone confirm there was ever actually a trading halt?

I've personally never known a halt without an announcement, but that's not to say it can't happen.

Alan.

blackcap
10-02-2011, 08:33 AM
INteresting Alan, I may put an order in for some Notes today at 200% and see if there are any takers. Surely there will be? But buying notes now and getting discounted shares might be an interesting play.... Good luck to all noteholders that have them from the beginning. Please do change the composition of the board once you get control.

Sorry just realised that 200% still means I fork out 90cents for a $1 face due to the time remaining. I guess you would need to buy at about 2000% to pick up the notes for 50cents or something. Still cant do that.... too far away from 85% range.

Enumerate
10-02-2011, 12:31 PM
I reckon that the NZF010 has been halted, pending election. I expect that after the 24th - there will be trading under 2 codes (NZF010a and NZF010b, as an example) reflecting the election choice of a prior owner. This, of course, will mean that the registry will need to be informed of the election choices.

This leads to some interesting scenarios, post 24th Feb.

You could take a hybrid "hedge" position - sell some of one type, buy some of another for a mixed position.

A price difference might open up between the two notes. I wonder if there is an arbitrage opportunity?

New developments on the partner currently doing due diligence could drive some price dynamics.

I remain disturbed by the lack of transparency on this process. The company, the NZX exchange and the Trustee are NOT covering themselves with glory.

Tony Two Gloves
10-02-2011, 03:26 PM
I agree a poor job all around, the major shareholders are looking after themselves and will walk over the rest. There still has been no release to the NZX about a potential partner but in reality what do they have to offer? I would be surprised if there is much substance to this, I think this is a smoke sceen to stop lending and conserve some cash so they may purchase some notes to retain a majority. I see some trades today at 0.10......I think it can go a lot lower still.

invessi
11-02-2011, 09:55 AM
Good morning

I have watched the posts over the past few days with interest, a lot of guess work going on and it is obvious to me that some of the posts are designed to manipulate. The press are not helping with the inaccuracy of their reporting, see the news release below in response to the article written by Tamsin Parker in the Herald, its laughable!
My comments are:

Mark Thornton has moved into John Callaghans role as CEO, he and John are the two founding and only executive directors, They were both originally with the ASB before forming NZF, Mark Thornton is very capable of taking the company to the next level. John Callaghan is still on the board and Richard Waddel is still the Chairman of the board.

In the interests of note holders and shareholders, they are making prudent decisions to protect those investors and they have been careful not to breach their trust deed, the major shareholders have in the most part retained their shares and kept the equity in the company, the executive directors draw very modest salaries, they have forgone dividends for several years, they drive modest cars (John Callaghan does not even have a company car, he purchased his own car), I know middle executives who have better packages than they do! They have always been transarent with their reporting. They announced some time ago that they were seeking a financial partner in order to improve the liquidity of their finance company book (which is only about 17% of their total book), this improved liquidity will enable them to apply for an investment grade S&P rating, they have recently announced to the market that they are in the final stages of due diligence with a financial partner.

I am not aware of any acrimony with regard to Finance Direct, you may not be aware but most of their loans are brokered and not on their balance sheet.

Here is the reponse from NZF to the Herald article:

NZF
02/02/2011 16:27
GENERAL

REL: 1627 HRS NZF Group Limited

GENERAL: NZF: Response To NZ Herald Article 2 February 2011

2 February 2011

NZF Group Limited (NZF) - Response To NZ Herald Article 2 February 2011

NZF wishes to clarify a number of inaccuracies contained in the article
written by Tamsyn Parker that was published in the New Zealand Herald earlier
this morning under the headline "Cash not an option, NZF tells investors".

This article caused a flurry of calls from concerned investors in secured
debenture stock in NZF's wholly owned subsidiary, NZF Money Limited, and
undue worry as investors assumed that this related to their investment in
that company. Given events over the last three years in the finance company
sector, inaccurate reporting simply unnerves and confuses debenture stock
investors.

The particular inaccuracies in the article that NZF wishes to clarify are as
follows:

(1) Paragraph 1 - Investors in Capital Notes are not locked in for five
years. NZF Capi
tal Notes are a tradable security on the secondary market and
therefore can be sold for cash.

(2) Paragraph 2 -

a. NZF's former name was New Zealand Finance Holdings Limited and not New
Zealand Finance. New Zealand Finance Limited is the former name of NZF Money
Limited.

b. NZF is not a finance company and therefore never applied for coverage
under the Government's Retail Deposit Guarantee Scheme (RDGS). Two of NZF's
subsidiaries, NZF Money Limited and Finance Direct Limited, were both covered
under the RDGS, with both companies successfully exiting the Scheme on 12
October 2010.

(3) Paragraph 3 - Whilst the introduction of the RDGS on 12 October 2008
achieved its objective of stabilising the market, it also had the adverse
effect of putting unnatural pressures on cash flows nearing the expiry of the
guarantee on 12 October 2010. In order to properly plan its business and to
avoid further unnatural pressures being placed on cash flows towards the
expiry of the extended RDGS on 3
1 December 2011, the Directors of NZF Money
Limited did not consider it viable to go through a re-rating exercise to
obtain a rating that would enable it to apply for the extended RDGS. Due to
its size, Finance Direct Limited was exempt from the requirement to obtain a
rating by an approved ratings agency and, for similar reasons to NZF Money
Limited, Finance Direct Limited did not see any benefits in applying for the
extended RDGS.

(4) Paragraph 8 - Mark Thornton is the Chief Executive Officer and not the
acting Managing Director.

(5) Paragraph 21 - NZF is not a finance company with a B rating. NZF is in
fact a well diversified financial services group which has a wholly owned
subsidiary, NZF Money Limited. This company is a finance company that
received a NZ Dollar long-term issuer rating of B (Outlook Negative) from
internationally recognised ratings agency Standard & Poor's on 24 February
2010.

(6) Paragraph 23 - As mentioned above, investors do have an exit option i.e.
selli
ng their Capital Notes on the secondary market for cash.

(7) Paragraph 26 - NZF does not and has never owned a stake in "Finance Now".
NZF does however own a 70% interest in Finance Direct Limited; a small
consumer based finance company that has successfully traded in New Zealand
for over 10 years.

(8) Paragraph 28 - NZF's former name was New Zealand Finance Holdings Limited
and not New Zealand Finance. New Zealand Finance Limited is the former name
of NZF Money Limited. NZF does not and has never owned a stake in "Finance
Now". It is important to note that when the Capital Notes were originally
issued in September 2006, the world was a different place. No one had
contemplated the meltdown that would ensue over the next few years affecting
the finance company sector and the devastating effects on investors, where
some Capital Note holders also lost some or all of their investments. NZF
has continued to pay interest on its Capital Notes on time, every time, and
will continue to
manage its business on a prudent basis.

In previous NZX Announcements, we have also advised that NZF was in the
process of formulating a recapitalisation plan, including seeking new capital
partners, in order to take advantage of growth opportunities that exist
within the Residential Mortgage Backed Securities market in New Zealand.

We are able to announce that NZF is in the final stages of negotiation with a
new business partner which we believe offers the most effective solution for
NZF. The negotiations have not yet been concluded and are subject to
completion of due diligence, where we have been asked to suspend all new
originations in NZF's Home Loans Division until the negotiations and the
necessary due diligence has been completed. The negotiations are also
subject to a confidentiality agreement and therefore we are unable to release
any further information to the market at this stage. We will however update
the market with further announcements in due course.

ENDS

Mark
Thornton
Chief Executive Officer

See the NZX release for more details and for further information please
contact:
Mark Thornton, Chief Executive Officer
Tel (09) 523 5861 or (021) 723 766
Date released: Wednesday, 2 February 2011
End CA:00205124 For:NZF Type:GENERAL Time:2011-02-02 16:27:59

invessi
11-02-2011, 10:53 AM
More news:

NZF may have new partner in weeks
NZF Group's potential new business partner may be signed up within two or three weeks.

Friday, 4 February 2011
by Jenny Ruth

Chief executive Mark Thornton says he can't give an exact timetable but is hopeful matters can be concluded within that timeframe.

NZF has been working to attract much-needed fresh equity since early last year.

Thornton has been quoted as saying the potential partner had asked that all new mortgage originations be suspended while negotiations continue. He has clarified that this only applies to the company's home loan product financed by its Westpac facility.

Other parts of the company, including its half-owned Mike Pero Mortgages, continue to write home loans, he says.

Thornton also clarified what would happen to investors in its $20 million of capital notes, which are NZX listed, who don't wish to rollover their investment into new notes.

NZF, unsurprisingly, given its precarious financial position, has ruled out repaying those investors in cash when the notes mature on March 15, instead offering a new five-year note paying 6%, well below the 9.25% the notes currently earn.

But investors can also opt to have their notes converted to equity which may be the better option if investors are confident the company will be recapitalised.

Thornton says investors opting for equity will be issued shares to the face value of the notes at a discount to the market price on NZX.

"The price is calculated on the weighted average price of trading over 20 working days prior to maturity," he says.

"If that remained at 14.5 cents, the conversion price would be 95% of that, ie 13.78 cents so $100 would equate to 725 shares."

Neither the notes nor NZF shares are particularly liquid. The shares last traded at 14.5 cents on January 21 while the notes last traded on January 24 at 85 cents in the dollar.

NZF reported a $1.4 million net loss for the six months ended September when equity of just $12.8 million supported $268.8 million of total assets. Cash had dropped to $4.1million at September 30 from $15.3 million at March 31 last year.

blackcap
11-02-2011, 11:09 AM
MEMORANDUM
To : Market Participants
From : NZX Client and Market Services
Date : January 28, 2011
Subject : Rollover of NZF March 2011 Capital Notes
Message:
Please be advised of the following information in relation to the rollover of the NZF March
2011 Capital Notes (NZF010), to a new tranche of NZF Capital Notes (NZF020).
As per the market announcement by NZF Group Limited (NZF) on Thursday, 26 January
2011, the Notification Date is 24 February 2011 and Election Notices have now been sent to
holders of the NZF010s on the Election Record Date.
Accordingly, trading in NZF010s will be halted from the close of business on Friday, 28
January 2011.
Rollover Details:
Quotation of NZF020s will commence on Wednesday, 16 March 2011, being the business
day immediately following the Maturity Date.
The terms of the NZF020s are as follows:
Maturity Date: 15 March 2016;
Interest rate: 6.0% p.a; and
Short name: NZF 15/03/2016 6.0%.
The ISIN for this security will be contained in the Listing and Quotation Notice, which will be
sent to the market as soon as these details are available.
Timetable:
Date Event
Jan 28, 2011. Trading halt placed on NZF010 at close of business.
Feb 24, 2011. Notification Date (Election Notices returned to registry by
5pm)
Mar 15, 2011. Maturity Date
Mar 16, 2011. Trading in Capital Notes resume under the code NZF020
ENDS
!

This from the NZX explains the trading halt in the 010's

minimoke
11-02-2011, 11:27 AM
....The press are not helping with the inaccuracy of their reporting, see the news release below in response to the article written by Tamsin Parker in the Herald, its laughable!
Mr Thornton isn't helping either. he might have said in his response that:
"(1) Paragraph 1 - Investors in Capital Notes are not locked in for five years. NZF Capital Notes are USUALLY a tradable security on the secondary market and
therefore can be sold for cash. HOLDERS WILL BE UNABLE TO TRADE THEIR NOTES FROM 28 JANUARY 2011 THROUGH TO 16 MARCH 2011. AFTER 16 MARCH HOLDERS HAVE TO HOPE AND PRAY TO THEIR GOD THAT SOMEONE (PLEASE ANYONE) AT LEAST MAKES A BID. WE ACCEPT NO RESPONSIBILITY IF THAT BID IS HEAVILY DISCOUNTED



My comments are:
.... they drive modest cars
C'mon - we need a better reason to invest than the type of car a director drives. Have we forgotten already what Alan Hubbard drives?

Alan3285
11-02-2011, 12:34 PM
Timetable:
Date Event
Jan 28, 2011. Trading halt placed on NZF010 at close of business.
Feb 24, 2011. Notification Date (Election Notices returned to registry by
5pm)
Mar 15, 2011. Maturity Date
Mar 16, 2011. Trading in Capital Notes resume under the code NZF020

This from the NZX explains the trading halt in the 010's

Thanks Blackcap - I hadn't spotted that.

Alan.

Tony Two Gloves
11-02-2011, 12:50 PM
I don't like they way they slant things....The one that made me laugh the most was "NZF & Finance Direct Sucessfully Exit The Deposit Guarantee Scheme" ahh hello, you were kicked out because you didn't qualify due to a poor Standard and Poors rating. What a ridiculous headline !
Invessi just ask the NZF directors about Finance Direct - they want out. If they lost $160K in six months and the full 12 months I suspect will be south of a $300K loss for a company with a small loan book who as you say can broker this is a terrible performance. I was advised they have averaged about 35 loans a month over the last couple months, their model needs at least 2 to 3 times that volume to break even apparently. Luckily I no longer have Debenture Stock with FDL !! That sort of stress does not lead to a rosey boardroom and probably why Callaghan and Waddel have been removed from their board. I do not know what the relationship with Liberty is like in regards to Pero's but one could assume with the significant fall in profitability it would also be less than Rosey also.

Enumerate
11-02-2011, 01:14 PM
Looks like I was wrong about any trading in the NZF010s before the 15th of March.

Maybe the NZX doesn't think the news is worthy of being rated market sensitive ... because they have just destroyed any market that existed.

Everything seems to be done to remove or mitigate the possibility of a "Death Spiral". I am surprised that the mandarins at the NZX in Wellington don't just simply regulate a market price and be done with it.

Next, we will be calling Mark Weldon the "Dear Leader" as we queue, in gratitude, for the the 0.5% annual dividends mandated by NZX regulation.

invessi
11-02-2011, 01:49 PM
OK, whatever, I guess you must have got burnt but FDL is a very small part of the group so lets keep things in proportion! New financial partner, more RMBS placements and Mike Pero Real Estate is where we appear to be heading!

blackcap
11-02-2011, 01:51 PM
Somewhat puzzling to me is managements choice to have Note holders get shares... This will seriously dilute their existing investment and at this point in time the directors are also large shareholders? Theories anyone?

getontoit99
11-02-2011, 02:00 PM
MEMORANDUM
To : Market Participants
From : NZX Client and Market Services
Date : January 28, 2011
Subject : Rollover of NZF March 2011 Capital Notes
......

So the memo was sent only to market participants (brokers), and not posted as a general announcement. This explains why investors only found out about the trading halt if they attempted to by or sell the notes.
Trading halts are usually communicated to all and sundry through adding an announcement to the NZX.COM pages covering the halted securities.

Xerof
11-02-2011, 02:04 PM
Theories anyone?

It's called Hobson's Choice.....they have no cash to repay holders who would inevitably elect to cash out if given that option.......

invessi
11-02-2011, 02:16 PM
Quite simple Blackcap, preserve cash and regretably dilute share value as a means to an end, the company survives and continues to grow through working capital, new partners and drive, they have a very dedicated team who have been together for some time now, thats their culture and thats the difference between them and comparitive companies that have bit the dust!

The major shareholders are in for the long term, so should you be if you want to preserve your investment, the market fallout of the last 2 years and greed do not equate in the current climate!

Xerof
11-02-2011, 02:27 PM
So the memo was sent only to market participants (brokers), and not posted as a general announcement. This explains why investors only found out about the trading halt if they attempted to by or sell the notes.
Trading halts are usually communicated to all and sundry though adding an announcement to the NZX.COM pages covering the halted securities.

That is an absolute disgrace - management and the board can't even face up to letting bondholders and current shareholders know the facts.........WTF is wrong with NZX

I trust NZX will be keeping a close eye on share price activity from Monday onwards until March 15th..........plenty of time for price manipulation to advantage current shareholders here........

Tony Two Gloves
11-02-2011, 02:53 PM
Invessi you seem to have a very positive perspective on this for a group of business's which clearly have broken business models? I didn't get burnt but there was no way I would roll over and continue to be a debenture investor in FDL or NZF I took my cash, just wish I could do the same with these notes......
How do you link Mike Pero Real Estate to NZF, according to the companies office he is the only shareholder / director, it would appear to having nothing to do with NZF? Mike Pero Mortgages is a totally seperate venture. I think the Real Estate venture will go the same way as the flight simulator business......crash landing !!

minimoke
11-02-2011, 03:28 PM
So the memo was sent only to market participants (brokers), and not posted as a general announcement. This explains why investors only found out about the trading halt if they attempted to by or sell the notes.
Trading halts are usually communicated to all and sundry though adding an announcement to the NZX.COM pages covering the halted securities.
This also explains why there is another thread around here somewhere titled "NZX is a Joke". Jeez, people make a fuss about Bernard Whimps low ball offers. How low ball can you get when you kill off trading and not let anyone other than Special People know. Clearly holders are just dross who will get tossed the periodic crumb of cake when they can't release their own bread.

minimoke
11-02-2011, 03:43 PM
Mike Pero Mortgages is a totally seperate venture.
Mike Pero spruiked Huljich Kiwisaver which in turn invested heavily in DIl. Don Brash has since resigned from Huljich and Mike Pero have stopped spruiking HWM. HWM were also being spuriked be Matt McCartens Unite Union which represent minimum wagers in Starbucks and call centres.

Mike Pero Mortagages is owned wholly by MPHM Limited which in turn is half owned by NZF and Secure Funding Ltd. SFL is owned by Liberty Financial Pty.

Join the dots

blackcap
11-02-2011, 05:03 PM
That is an absolute disgrace - management and the board can't even face up to letting bondholders and current shareholders know the facts.........WTF is wrong with NZX

I trust NZX will be keeping a close eye on share price activity from Monday onwards until March 15th..........plenty of time for price manipulation to advantage current shareholders here........

Plenty of time for that... but which way is it going to go? Down to 1-2 cents.... Issue of 1000 million shares and then pick them up for nothing on market at discounted prices? Or drive price up to 30 cents and preserve stake in the company?

Could be an interesting few trading months ahead... :)

invessi
12-02-2011, 11:18 AM
TTG, yes, they have broken the business model........they survived where nearly all others of their type did not!!

An emailed notice was sent out by the NZF home loans BDM advising finance and mortgage brokers that home loan lending was to be suspended while they completed due diligence with a new financial partner, this is an operational matter and they may not have been required to advise NZX, of this I am not sure! The suspension was at the request of the new investor!

NZF/Liberty own the MPM intellectual property and Mike Pero is contracted by them to use his face for 10 years. I can't see how he can go into real estate without involving the JV?

These are the comments made last week on stuff.co.nz "Pero formed a company called Mike Pero Real Estate limited in August last year and such a business might be a good fit with the mortgage broking business Pero founded in 1991.

However the possibility of adding a real estate arm to the mortgage and insurance broking business was not something Mike Pero Mortgages chief executive Shaun Riley was keen to discuss.

''All I can say is that it's something we have discussed and nothing's been finalised,'' he said.

He would not comment on rumours the new agency could be launched as early as next week."

I am inclined to take the 6% on the notes, at least I can sell down and probably get my money back over time, a large number of potentailly diluted shares is not that appealing, even though they might come right in the long term.

Xerof
12-02-2011, 02:46 PM
but which way is it going to go? Down to 1-2 cents.... Issue of 1000 million shares and then pick them up for nothing on market at discounted prices? Or drive price up to 30 cents and preserve stake in the company?



Well........ not sure the Bondholders also hold enough ords to 'drive the price down', but equally unsure whether the majority shareholders are foolish enough to try to manipulate the price higher either. For sure, any unusual activity will draw attention of regulators - a few on this site will make sure of that.......

The truth is probably somewhere in the middle - it sits around 10 cents with no activity as usual, and we see what eventuates.

Either way, my pick is the new bonds and the share price both get trashed after March 15th

Wildcard is this 'equity partner' and timing of any announcement. If they had any brains they'd wait as well..........why hurry?

invessi
14-02-2011, 02:00 PM
NZF - Mike Pero Mortgages - Mike Pero - Mike Pero/Mike Pero Real Estae JV - Liberty Financial - NZF Home Loans - Liberty Financial -............now join the dots!

Pero launches real estate company with commission inducement


Published 14 February 2011
It’s hardly been a secret – mortgage broker Mike Pero has launched Mike Pero Real Estate Ltd, offering customers a reduced commission rate of 2.95% to sell their homes.

Mike Pero Real Estate is a partnership between Mr Pero and the company he founded in 1991, Mike Pero Mortgages Ltd.

He said that commission rate reflected the challenging economic times: “According to a recent Colmar Brunton survey, 91% say a real estate company offering a commission rate of 2.95% would be enough to put them on their shopping list.

“For a long time, I have felt the 3.95% rate charged by most real estate companies is too much. It’s one of the most talked-about topics and what people grumble about most when selling their homes.

“Times have changed and, like many businesses, real estate has been revolutionised by technology. It’s now less about bricks & mortar and more about clicks & mortar. Marketing & communication through the internet & mobile phone technologies is massive in this industry – you don’t need to have huge overhead costs that are then passed on to customers through high commission rates.

“Our agents will work with state-of-the art technologies, including the latest iPads, with intensive online marketing and modern operating techniques & systems. Our new-generation real estate company will make smarter use of agents’ time, meaning they will individually earn more while they deliver a lower fee to their clients, even at the same number of sales.

“Realistically, with a better proposition for the home seller, the agent’s sales will increase, we believe, more than twofold. Effectively, we have taken a large part of the administration & management overheads out and shared those savings between the customer & the agent.”

Mr Pero said plans for the company included bringing franchise opportunities down to a salesperson level, which could include exclusive territory ownership: “To date, the industry has been unable to provide long-term incentives & ownership opportunities for high-performing salespeople. Our model has been proven in the home loan industry, where our people own their businesses. We really believe in the owner/operator business.”

Want to comment? Go to the forum.

Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.

minimoke
14-02-2011, 02:38 PM
NZF - Mike Pero Mortgages - Mike Pero - Mike Pero/Mike Pero Real Estae JV - Liberty Financial - NZF Home Loans - Liberty Financial -............now join the dots!

Pero launches real estate company with commission inducement

Invessi - there have been a few other articles and quotes around this venture. Mike Peros comment that these "high performer' Agents will be working from the back of a car is interesting.

Also this "reduced Fee" model has been tried before. Remember The Jones, Ghecko and Green Door. All tried, all failed.


IMO its not really a creative new solution - its simply a cut price strategy which are so often doomed to failure. If he wanted to get real inventive why not sell on a contracted hourly rate basis. Take a $500,000 sale at 2.95%. Thats a fee of $14,750. At $200 an hour (and I reckon thats generous for a real estate agent) does it really take 73 hours to sell a property. Whenever I've sold my properties its taken me no more than 15 hours - and that includes open home hours.

Real estate agents really need to get their act together. Say a competent agent can sell a house in 20 hours at $200 an hour. Thats over $400k a year income. Knock off overheads and franchise fees they are still looking at bringing in over $100k a year. Why punters use Agents remains beyond me.

blackcap
14-02-2011, 02:42 PM
Mini... I had that discussion with a friend just last Saturday. About the costs of Real Estate agents. My question is this: If they make so much money and barriers to entry are almost non-existent, then why is not everyone doing this and earning $100k per year? Or do they really earn that much? Why have the 2.95% merchants failed? Costs still too high? Im curious as I am a bit naive on this topic.

minimoke
14-02-2011, 03:15 PM
Why have the 2.95% merchants failed? Costs still too high? Im curious as I am a bit naive on this topic.
I'm not sure all the 2.95%'ers have failed. Theres a couple of firms in town offering 1% and they have been around for a few years.

I don't think real estate agents make much - a few of the top ones do. But rather than them being the top 20% I reckon they are probably the top 1% of agents. There will be a few in the next band down scratching a living . And the rest aren't making a living at all. I think you'l find the ones making the money are the Franchise owners - some of them are a bit like multi tier marketing. The ones right at the top of the pile make heaps in the fees off the back of the work of those that are under them. Your foot soldier agent is busy pounding the streets (or not) but the ones that get the lions share of the fee are the office owners and the regional franchise holders which then feeds into the national franchise.

Mike Peros lot should be really make a killing. Combine being a Real Estate agent who brokers the finance - they could double dip that sale very nicely. Cut your marketing to a website and twitter (in the old days i was signed up to email alerts). Get clients to pay for print media (plus 10% clip the ticket) for your broader exposure) and an agent could really be raking it in. But only if they can sell. Shame is that so many of them can't even take a decent photo let alone negotiate.

GTM 3442
14-02-2011, 04:40 PM
. . . . My question is this: If they make so much money and barriers to entry are almost non-existent, then why is not everyone doing this and earning $100k per year? Or do they really earn that much? . . . . .

Some do earn that much. Some do earn more. But what's the "lifespan" of a Real Estate Agent ?

I suspect that if I compare the faces in a 12-month old ad for an agency with the faces in a current ad for the same agency, there will be few faces in both ads.

Which leads me to suspect that there are two "tiers" - the good ones, who last, and the majority, who can't hack the pace and give up well inside 12 months.

Enumerate
14-02-2011, 04:50 PM
The Real Estate gig can hardly be the "deal" that triggered the suspension of loan allocations during a due diligence.

Also, it would appear that the Real Estate franchise is not a strategic move (how many banks are building estate agency networks).

Frankly, it would appear to be a misstep.

minimoke
14-02-2011, 05:49 PM
The Real Estate gig can hardly be the "deal" that triggered the suspension of loan allocations during a due diligence.
.
Could it be the Pero Minor's launch of the "divorceme" website . Perhaps theres an opportunity to borrow money for the legal fees and to buy/rent alternative accommodation while the divorce goes through. For the men they could borrow for the flash new car, for the women borrow for the nip'n'tuck. For the kids, both borrow to buy gifts to appease the guilt.

Tony Two Gloves
15-02-2011, 12:54 PM
Nice Mini - finally a sensible business model for this group!!

I think the real estate business is all about selling franchises as was the Mortgage business. Don't think to many of the MPM franchises will be overly happy or making much money in the current enviroment and in my humble opinion you would be mad to buy either franchise. They would have seen their income reduce and the value of their business get decimated, don't get me wrong this is not all MPM's fault but a combination of a poor market and high commission to pay to the franchisor is a bad recipe for making money.....

minimoke
15-02-2011, 04:23 PM
Kinda agree TTG.

Getting into real estate, be it mortgage broker or real estate sales, or knock of cheap legal fees, is a very brave move in the current climate. If there aren't any sellers around (which there aren't) there no point trying to flog something to buyers - there's nothing to buy!

Real estate is in a trough at the moment. Firms need to position themselves for when there is a break out from that trough. I'm not sure now is the time. So that means capital gets burnt until that particular market begins to turn. Even when it does turn I'm not picking any major swing anytime soon. We are moving into winter when house stock tends to traditionally slow down anyway. Perhaps they are planning a Spring/summer upsurge on the back of the Rugby World cup "feel good" factor.

Tony Two Gloves
16-02-2011, 03:26 PM
Yes it will certainly be tough, not sure how they hope to sell franchises in this enviroment. Did I read today they were hopeful of having 100 agents by the end of the year?

It looks like NZF have dumped their chairman also according to the companies office. No market announcement - there's a surprise!! So there are only four diretors who happen to be the four biggest shareholders no wonder we are all getting scewed over. I thought they were required to have an independant director being a listed company ?? He is also gone from NZF Money...

hmmmm rats and sinking ships, how does that go again??

minimoke
16-02-2011, 04:29 PM
It looks like NZF have dumped their chairman also according to the companies office. No market announcement - there's a surprise!!

hmmmm rats and sinking ships, how does that go again??
Waddel "left" 31 December but it took them till 15 Feb to update companies Office, 3 weeks after their announcement on the notes. Compare when Sclater left after 4 months in the job. That was on 7 Dec with CO updated same day. Or when Barkwill left on 22/9/10 - CO updated same day.

blackcap
16-02-2011, 04:48 PM
TTG... yes four directors and four biggest shareholders.... surely they dont want to see their investment down the drain? I surely wouldnt as a director shareholder of a company... They fact they have such large shareholdings still offers me some hope

getontoit99
16-02-2011, 09:01 PM
Glad to see the thread has finally come back to something relevant to investors.

The Capital Notes election process is underway and has only six business days to run. This includes time to get your election notices into the hands of the registrar.

Come on Noteholders, time is running short. All the pontifications and opinions in this thread may make the posters feel good - and some of them may even have money at stake - but there are serious decisions you need to make and time is running out.

Your choice # 1:
The nominally safe option (my italics and no opinion impilied) - roll your notes over on the new terms.
These appear to be: Renew on new terms of 6% pa for 5 years, sell on the secondary market if you can before 2016 (likely at a price way below par) or hang on until 2016 and hope NZF decides to redeem the Notes for cash then. If they do, this will be in 2016 dollars. At 2%+ pa inflation the buying power of your capital will have been been seriously eroded.

Your choice # 2:
Elect to take shares at a small discount to a volume weighted average price of 95% of what NZF shares traded at over 20 business days prior to the maturity date of the notes, or if no shares were traded during that time, at 95% of the last price . Important: Not electing to accept the new terms for the Notes will automatically result in conversion of your Notes to shares.

The twenty business day window of volume-weighted share prices to be used to set the Note-to-shares conversion rate, started yesterday (I think). The last price at which the shares traded at to date was 10c. (There may be scope for fun and games over the next few days, either way.).

A rough calculation based on the assumptions that 1/3rd of Notes will convert to NZF shares at 95% of the last traded price of 10c:
Noteholders will acquire about 69 million shares in total adding to the 71 million shares on issue, largely held by founders of NZF and related parties.

As Enumerate put it a few days ago, taking shares could be the "punk" option for Noteholders who are sufficiently disgusted at the rollover terms, and who can stomach moving to pure equity. Noteholders who must preserve capital at all costs need to think particularly carefully about this option.

As Enmurate has said previously here, the Trust Deed allows the company to change its mind after the election process and redeem those Notes for cash, where the holder didn't choose to accept the new terms. A theory put forward in this forum is that this might just come about because the company - which is controlled by the major shareholders - doesn't want to see a share price collapse. Links provided by Enumerate on the Trust Deed and the Investment Statement are in an earlier posting.

One view is that the NZF share price will in time improve, because in part, NZF didn't crash and burn like so many other finance companies, and that the company has a different business model with less exposure to dubious loan backing, than other finance companies. These are some factors for consideration; there may be others.

So there you go; my attempt to get back to the guts of the matter.

Good luck! No one said investing would be easy.:ohmy:

Everything above is my view and my understanding of the situation and obviously I'm not offering advice.

Enumerate
17-02-2011, 06:33 AM
Nice summary getontoit99.

In my view the resignation of the chairman should have been formally announced to the market. Wake up NZX!

minimoke
17-02-2011, 08:18 AM
(There may be scope for fun and games over the next few days, either way.).

There may well be scope for a bit of fun and games. But if we look at the long term trend this stock has gone from a high of $1.60 down to a 52 week range of $0.10 - $0.21. Bids are now settling closer to the $0.10 of the last sale. There is no good news to push the value up. Any movement over this long term trend of $0.10 should be an indication of market manipulation. Given NZX don't seem too concerned about announcing the suspension of trading in notes note the loss of the Chair I doubt their will be much interest in such manipulation. Perhaps noteholders might like to mitigate loss by buying at $0.10 and hoping to sell at $0.11 for a quick 10% profit in the next few days.

Tony Two Gloves
17-02-2011, 11:05 AM
I wonder if the chairman disagreed with the measly 6% offered and the treatment of the note holders and was politely showen the door?

Before Invessi tells me off again.....this is pure specualtion!! I know he has had a stroke last year so presume it may be for medical reasons.

invessi
17-02-2011, 02:03 PM
TTG, there is so much unsubstantiated and false comment on this site that it is laughable, you are way off course!

Tony Two Gloves
17-02-2011, 02:28 PM
Well that didn't take long......

In fairness Invessi you stated in your post the other day that Richard Waddel was still Chairman when clearly he wasn't and hasn't been since the 31/12/2010. Again a poor job by the company of communicating this which is strange when they plenty of time for ridiculous press releases like "NZF successfully exits the RDGS" which was absolutely rubbish.

Why they did not also press release that founding director and CEO John Callaghan has not played any active part in the business for over 12 months and is not expected to in the future? No disrespect to Mark Thornton but John Callaghan has been the driving force behind the company for some time as anyone there will tell you. This info for shareholders or potential investors is cruical.

They do a very poor job of communicating and only seem to want to release positive info, I think everyone deserves to know the good, bad and the ugly not just the shareholders who are directors.

minimoke
17-02-2011, 03:57 PM
They do a very poor job of communicating and only seem to want to release positive info, I think everyone deserves to know the good, bad and the ugly not just the shareholders who are directors.
There is no shortage of examples of Directors using the company as their own personal piggy bank. If the NZF Directors don't want to be cobbled with this tag they ought to be more transparent with the rest of the shareholders.

invessi
18-02-2011, 09:50 AM
My understanding is that Craig Alexander - lawyer is acting Chairman of NZF, at the time Richard Waddell became ill, it was promptly announced to the NZX, he has not resigned that I am aware of!

I am not aware that NZF are trying to hide anything, I have always found them to be transparent, however, there will always be information that is commercially sensitive and not announced to the market until the appropriate time. John Callaghans circumstances have been well documented by NZF!

I heard from a real estate agent friend of mine yesterday that Mike Pero Real Estate have already taken 60 agents on board and that they are now advertising for listings, I understand all of these agents are experienced with good track records, my friend has applied to join, he has been an agent with the one firm for the past 9 yeears and I would rate him in the top 5%!

invessi
18-02-2011, 09:53 AM
NZF
18/02/2011 10:31
GENERAL

REL: 1031 HRS NZF Group Limited

GENERAL: NZF: NZF Group Limited (NZF) Capital Notes

NZF Group Limited (NZF) Capital Notes - expiry date for election of "Renewal
Option" of Capital Notes

As at 18 February 2011, the level of acceptances for the "Renewal Option" on
NZF Capital Notes was 29.2% by amount. The final date (Notification Date) for
acceptances to reach the Registrar is 5pm on 24 February 2011. Those
Noteholders who have not elected to accept the "Renewal Option" by this date
(which cannot be changed) will be allocated ordinary shares in NZF on the
Maturity Date under the terms of the Capital Notes Trust Deed.

The first interest payment on the new Capital Notes will be made on 15 June
2011.

Capital Noteholders that do not elect to accept the "Renewal Option" and are
allocated ordinary shares, should note that NZF last paid a dividend on its
shares in December 2008. NZF will not be paying a dividend in this financial
year and given the fragili
ty of the economic recovery and the major impact of
events that have occurred in the last three years, NZF are unable to
ascertain at this stage when dividend payments will recommence.

Malcolm Lindeque
For and on behalf of the board of directors
Company Secretary

ENDS
End CA:00205782 For:NZF Type:GENERAL Time:2011-02-18 10:31:59

Tony Two Gloves
18-02-2011, 10:00 AM
Invessi, check the companies office he resigned effective 31/12/2010. Craig Alexander is not and has never been a director of NZF Group - these are both facts, maybe time to fire your "source".

Mini - looks like they don't want us to take shares with all that dividend talk....very subtle !

invessi
18-02-2011, 10:13 AM
Who is this then!

The Board of Directors consists of six directors, four of
whom are non-executive directors. Richard Waddel is an
independent director
[as that term is defined in the NZX Listing Rules].
Mark Thornton
Executive Director
Mark has over 35 years
experience in the banking
and finance industry in
New Zealand. He initially
joined Bank of New Zealand
and gained experience in
areas of retail banking then
moving to managerial roles
in commercial and corporate
banking for 18 years up until
1992. He then moved to ASB
Bank Limited taking up a
management role in ASB’s
commercial division up until
2000 when he left to take up
full-time employment with
NZF. During his banking
career he focused on all facets
of lending assessment to a
wide range of businesses from
major corporate to medium
to small-sized companies. He
is a founding Director of NZF
and his current responsibilities
include lending evaluation
and assessment, the credit
approval process and debt
recovery.
Peter Huljich
BCom, Dip. NZX, SA Fin.
Non-Executive Director
Peter is the founder of Huljich
Wealth Management, New
Zealand’s largest KiwiSaver
provider in terms of members
with a fully-owned New
Zealand manager. He has
extensive and specialist
knowledge of the financial
markets with over ten years
experience successfully
investing in New Zealand,
Australia, Europe and the
Americas. His understanding
of and familiarity with
the securities industry
complements the strengths of
the current Board. In addition
he is a Non-Executive Director
of Finance Direct Limited and
a member of the New Zealand
Business Roundtable.
On 10 November 2010, the
Securities Commission
filed criminal proceedings
against Peter Huljich as a
director of Huljich Wealth
Management (New Zealand)
Limited alleging certain
compensation payments
made by Peter Huljich to the
Huljich KiwiSaver Scheme in
2007 and 2008 should have
been referred to in the offering
documents and financial
statements for the Huljich
KiwiSaver Scheme. Peter
Huljich has advised that the
proceedings will be vigorously
defended.
Pat O’Connor
Non-Executive Director
Pat is well known and
respected in the local business
community. He has had a very
broad background primarily
focused on wholesaling and
retailing and up until recently
he owned and operated a
very successful chain of
stores, importing and retailing
furniture. He sold this
business to concentrate on his
diverse property interests. Pat
is a founding Director of NZF
and his involvement includes
an advisory capacity offering a
diversity of business skills and
experience.
Craig Alexander
LLB
Non-Executive Director
Craig was appointed as a
Director on 29 October 2010.
Craig is a Partner in Alexander
Dorrington Lawyers and
brings with him a wealth of
business experience having
practiced law for over 25 years
and having participated in
founding several successful
businesses. Craig specialises
in the commercial and
financial sectors and has a
particular interest in product
development for lending
institutions and business.

invessi
18-02-2011, 10:15 AM
And hee is the source:

http://www.nzf.co.nz/Investors/Docs/2010%20Investment%20Statement.pdf

Tony Two Gloves
18-02-2011, 10:28 AM
That is NZF Money, not NZF Group - come on!. I would trust the companies office rather than a 12 month old Prospectus on the companies website, the info in that Prospectus has all changed and is no longer valid. NZF Group only has four directors, none of which are independant - neither Richard Waddel or Craig Alexander are currently directors.

http://www.business.govt.nz/companies/app/ui/pages/companies/1474151/directors

Tony Two Gloves
18-02-2011, 10:30 AM
BTW I accept your apology without you having to ask :)

minimoke
18-02-2011, 10:30 AM
Who is this then!
.
Who knows!.

NZF Website (which is presumably more up to date then the 2010 Investment Statement) say:Richard Waddell, Mark Thornton, John Callaghan, Peter Huljich and Pat O'Conner.

Companies Office (which is presumably the most reliable source) says John Callaghan, Peter Huljich, Pat O'Connor, Mark Thornton. No mention of Richard Waddell because he left in Dec 2010.

If we can'r reconcile the number of directors how will we reconcile their accounts?

Xerof
18-02-2011, 10:41 AM
TTG, there is so much unsubstantiated and false comment on this site that it is laughable, you are way off course!



invessi, mini and TTG are willing to provide the knife and fork.........

minimoke
18-02-2011, 11:00 AM
Capital Noteholders that do not elect to accept the "Renewal Option" and are allocated ordinary shares, should note that NZF last paid a dividend on its
shares in December 2008. NZF will not be paying a dividend in this financial year and given the fragility of the economic recovery and the major impact of events that have occurred in the last three years, NZF are unable to ascertain at this stage when dividend payments will recommence.

Malcolm Lindeque
For and on behalf of the board of directors
Company Secretary

ENDS
End CA:00205782 For:NZF Type:GENERAL Time:2011-02-18 10:31:59

Clearly NZF want note holders to convert. Clearly the company is deep in the poo - no dividends in sight and no money to pay note holders.

There are a number of scenarios that can be developed in this situation. Heres one.

The majority shareholders have seen their value hammered over the past few years. They want to retrieve as much value as they can. They cannot maximize value if their shares are diluted by Noteholders taking up shares. Note holders can expect to sell their notes on the market (yea right) but at a likely significant discount. This isn't a problem for as long as they can be suckered into thinking NZF has a future and their notes will be paid out. In the meantime shareholders sell on market. Last sale was $0.10. If they can sell at $0.11 they have made 10%, shrinking their loss exposure. If they can sell in a merger / takeover they will get something back - but not as much if the noteholders have diluted share pool.

Paying interest to noteholders will give the illusion the company is fine. It also buys shareholders time to stich up a deal to sell their shares for the best return. How that sale impacts on Note holders is not of concern once they have exited the business.

In the meantime there is probably enough cash in the business to pay Director Fees which are in lieu of dividends. If there are large noteholders they may have a large enough stake to seek a position on the Board -again diluting the pool of fees available to existing directors.

Edit: in 2010 they paid $697,000 in Director fees (Callahan got $225,000). For a company worth $7.6m thats just under 10% "Special Dividend"

No mater how it is dressed up the best outcome is for Noteholders to roll their investment over for another 5 years.

minimoke
18-02-2011, 11:02 AM
NZF Group Limited (NZF) Capital Notes - expiry date for election of "Renewal Option" of Capital Notes.

Need to keepupwithit getontoit. See post 183

invessi
18-02-2011, 11:37 AM
TTG, There is only one board, that is the board for the group, NZF Money is part of the group, you said "Craig Alexander has never been on the board" so obviously you are incorrect on this point - also, I saw a document recently that showed Craig Alexander as Acting Chairman!

minimoke
18-02-2011, 11:56 AM
TTG, There is only one board, that is the board for the group, NZF Money is part of the group, you said "Craig Alexander has never been on the board" so obviously you are incorrect on this point - also, I saw a document recently that showed Craig Alexander as Acting Chairman!
Invessi, I think you are confusing NZF with NZF Money.

Craig Alexander joined the board on NZF Money Limited on 29 October 2010. This was before Richard Wadell left on 31 Dec 2010. His illness was announced 20 March 2010.

At post 192
My understanding is that Craig Alexander - lawyer is acting Chairman of NZF, at the time Richard Waddell became ill, it was promptly announced to the NZX, he has not resigned that I am aware of!

The Board of NZF Money are now: Callaghan, Alexander, Henderson, Huljicjh, O'ceonner,and Thornton.

If we want a discussion on NZF Money perhaps you could start a new thread.

Tony Two Gloves
18-02-2011, 01:11 PM
Invessi.....yes you are getting a little confused and that is being kind, I stand by what I said because it is a verified fact as per the link in previous post. You have been incorrect on several points NZF Money has a different board and set of directors from NZF Group, Finance Direct and MPM. Craig Alexander may be acting chairman for NZF Money but he is not and has never been a director of the listed entity NZF Group. He is also chairman of Finance Direct - presumbly if he was chairman of NZF Group both Finance Direct and NZF Money would not be able to call him "Independant" in their respective offer documents.

it really is ok, you can say sorry TTG I was wrong and you were right :):)

Enumerate
18-02-2011, 02:31 PM
One thing I cannot understand is the pro-election attitude of NZF. I would have thought they would be equally happy for conversion to equity (this is actually a better outcome for the company - if not the existing shareholders).

Comparison to ALF and the no-dividend reminder indicates that directors are actually taking a negative view on their own share price.

Maybe they think that the election deal they are offering sucks - it needs a bit of "stick" applied, in the absence of any feasible "carrot".

Xerof
18-02-2011, 02:42 PM
Enumerate,

I think I can understand their desperation completely - they want bondies rolled, not converted - I really do think its that simple, for two reasons:

dilution of their own holdings
danger of a strong ALF-like sell off after the dilution, adding further to their personal holdings woes

minimoke
18-02-2011, 02:46 PM
One thing I cannot understand is the pro-election attitude of NZF.
It strikes me that this notice can be construed as a recommendation to take up the notes and a recommendation against the shares. I guess they are covered by the Financial Advisors requirements - but I missed the bit on the end where its usual to recommend seeking independent financial advice before making a decision.

Tony Two Gloves
18-02-2011, 03:18 PM
I agree Xerof, if the bond holders all rolled over what a great result for major shareholders, shareholding stays in tact and they have just reduced the interest payable on the notes by $750,000 per annum to boot.

If this is what they wanted they should have offered a better interest rate.

Xerof
18-02-2011, 03:27 PM
Yes, makes you wonder whether they have completely mis-read the situation, expecting obedient and/or lethargic bondholders to do the "right" thing and roll.

Fatal mistake was to make the 'default' position to convert ( it has been the other way round in any issue I have been involved in), but that may have been set in concrete in the Trust Deed at issuance.

QOH
18-02-2011, 04:28 PM
I suspect us noteholders are damned if we do and damned if we don't.
If/when NZF goes under are noteholders ranked equally with shareholders?
I rolled mine over today, (not that my small amount will affect any equations).
At least I can pick up 8% interest while it lasts.

Enumerate
19-02-2011, 10:30 AM
If/when NZF goes under are noteholders ranked equally with shareholders?

No, they are subordinated to the senior debt but are senior to the equity holders, in liquidation.

Xerof
19-02-2011, 04:43 PM
sorry to be the bearer of bad news QOH, but it's 6%

winner69
19-02-2011, 05:33 PM
sorry to be the bearer of bad news QOH, but it's 6%

OOH bought the ones at a discout and said earlier he would be getting the equivalent to 8% .... one way of looking at eh .... but I think he agrees he is being pushed into doing something he doesn't want to do

QOH
19-02-2011, 06:38 PM
Yes winner is right I bought them on secondary market and didn't pay face value. Yes I feel it's a lose lose situation whatever I chose.
PS I'm a female not a male.

Xerof
20-02-2011, 08:55 AM
Ah, Queen of Hearts, I hadn't seen your earlier comment. Well, a discount is better than a slap on the belly with a wet fish.

minimoke
21-02-2011, 02:03 PM
If 1/3rd of Capital Notes become shares, and the share price through the 20 business days to 15 March stays at 14.5c:


10,000 notes plus accrued interest = $10,244 (approx.)

This buys 74,230 shares at 13.8c which is 95% of 14.5c.

6.6m Notes converting will create about 47.8 million new shares bringing the total on issue to about 125m.

Dividing the current market capitalisation by 125m gives a new nominal price of 8.9c.


Does this make sense?

Thanks
Scott
If I may use your calcs getontoit - we have a bit more market data.

Today the funs and games began with a $300 trade at $0.10. We also know 29.2% have gone for the notes. So lets assume Sp = $0.10 and take up of notes = 33%.
1. $13.3m notes convert
2. this buys 140,000,000 shares at $0.095 (95% of $0.10)
3. Total on issue = 216,666,668
4 Divide the current market cap by 216m gives a new nominal price of $0.035

Please feel free to correct my math. My One eye isn't so good at reading lots of zeros.

Tony Two Gloves
21-02-2011, 02:37 PM
I suppose that would be correct but the Liability of $13.3m disppears so their equity will increase by $13.3m. It will be interesting to see if this $13.3m increase in equity equates to $13.3m increase in market cap? If it does the new nominal price will be just under 0.10, we need a couple more trades around the 0.03 mark......

Xerof
21-02-2011, 02:59 PM
Yeah, I agree with TTG, you need to assume makt cap is increased by the decrease in Liabilities.

The salient point remains that Director shareholders effectively could lose control of the Company at 10 cents, and 33% uptake, although I guess the spread of new shareholders creates a disparate bunch of folks with no real interest in managing it

Tony Two Gloves
21-02-2011, 03:10 PM
Yeah based on Mini's figures above I think the major shareholders would be left with approx 28% of the company. The biggest shareholder Callaghan would drop from 23% to around 8% ouch !!

minimoke
21-02-2011, 03:12 PM
It will be interesting to see if this $13.3m increase in equity equates to $13.3m increase in market cap? Perhaps the market already priced this into the current SP?. Its not like its a new injection of cash - its just shuffling the numbers around.

Tony Two Gloves
21-02-2011, 03:44 PM
Yeah hard to say if its priced in or not, I suppose getting rid of $13M of debt that you are paying 9.75% interest on would be good for anyone in these times.

minimoke
21-02-2011, 03:53 PM
Yeah hard to say if its priced in or not, I suppose getting rid of $13M of debt that you are paying 9.75% interest on would be good for anyone in these times. With total loan borrowing at $278m a $.5m saving is a drop in the bucket really. If you have no money I guess every bit helps though, especially when you have Directors Fees to pay.

minimoke
22-02-2011, 11:22 AM
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.

Enumerate
22-02-2011, 12:21 PM
Looks very much like we are on the path to the "Death Spiral".

If you were an existing holder of shares - you would have to give very serious consideration to dumping, at current prices, in the knowledge that you could pick up many more in the near future. This behaviour would give you a partial hedge against the impending dilution. However, we are seeing very minimal trades, at the moment.

Tony Two Gloves
23-02-2011, 11:44 AM
I think in a few months time the share price will be mimicking the ALF price. At 0.08 the market cap is around 6.0M which I think is roughly half of what the equity was at 30/09/2010 so I think Mini is right that this is factored into the SP. So if we assume that the extra 13.0M of equity is only valued at 50% by the market and conversion takes place at 0.08 then I guess the SP will be some where south of 0.04 when the dust settles. From there I think it can only go one way down to the penny dreadful status....

If I was the seller looking for 0.09 at the moment , I would think seriously about taking the 0.06 on offer.

invessi
23-02-2011, 01:40 PM
And someone did!!

Tony Two Gloves
23-02-2011, 02:02 PM
WOW someone listened to me :) Now if only I could get the wife to do the same thing............

Alan3285
23-02-2011, 02:48 PM
WOW someone listened to me :) Now if only I could get the wife to do the same thing............

I actually did LOL at that!

Alan.

Greentea
23-02-2011, 03:35 PM
Has anyone thought that the possible "financial partner" who is doing due dilgence may be a future buyer for all the shares?

Enumerate
23-02-2011, 05:39 PM
Has anyone thought that the possible "financial partner" who is doing due dilgence may be a future buyer for all the shares?

If this is true, the efforts made by directors to dissuade people from converting to shares, accepting a new note on unfavorable terms, would be viewed as a shabby form of manipulation. Clearly, this cannot be the case.

Alan3285
23-02-2011, 06:06 PM
If this is true, the efforts made by directors to dissuade people from converting to shares, accepting a new note on unfavorable terms, would be viewed as a shabby form of manipulation. Clearly, this cannot be the case.

I very nearly fell off my chair reading that one!

Alan.

Tony Two Gloves
24-02-2011, 08:18 AM
Alan you will have to be careful reading this thread, laughing out loud then nearly falling off your chair. You don't want to end up on the floor which appears to be where the NZF share price is heading.....

At 0.06 this will be a disaster for the company and the major shareholders, I wonder if they will find the cash to buy the notes? I know we all suspect they don'y have the cash but Mr Huljich surely does and the only question is does he want more exposure to this company in this market. I would think not, I think he got his shares at around 0.53 so although he could average down I don't think there is enough appeal to do so.

Alan3285
24-02-2011, 12:37 PM
Alan you will have to be careful reading this thread, laughing out loud then nearly falling off your chair. You don't want to end up on the floor which appears to be where the NZF share price is heading.....

Bruises are healing :-)


At 0.06 this will be a disaster for the company and the major shareholders, I wonder if they will find the cash to buy the notes? I know we all suspect they don'y have the cash but Mr Huljich surely does and the only question is does he want more exposure to this company in this market. I would think not, I think he got his shares at around 0.53 so although he could average down I don't think there is enough appeal to do so.

Not sure how it is bad for the company? The company itself would, I guess, prefer that all the debt was converted to equity, but apart from that, I don't see how 'it' would care about its own share price?

The existing (and prospective) shareholders on the other hand - they will care a lot!

Alan.

Tony Two Gloves
24-02-2011, 01:51 PM
Well I did say "Company and the major shareholders" and in reality who is "The Company" it is the shareholders. All current shareholders will have lost money at an SP of 0.06 as this is an all time low. If the major shareholder had of sold out at $1.50 he waould have got $26.8M and some change, if he sold out now he would just have the change!!

That is why some independence is needed on the board, the board currently (according to companies office) consists of the major shareholders who as human nature dictates would obvuiously make the best decisions for themselves ahead of the company and other minorities. At this price it will be disastrous for them.

Enumerate
24-02-2011, 02:12 PM
First of all, apologies for nearly knocking Alan off his chair ...

We are now approaching the point of no return ... election of takeup of the new notes by the 24th.

Alan3285
24-02-2011, 03:08 PM
Well I did say "Company and the major shareholders" and in reality who is "The Company" it is the shareholders. All current shareholders will have lost money at an SP of 0.06 as this is an all time low. If the major shareholder had of sold out at $1.50 he waould have got $26.8M and some change, if he sold out now he would just have the change!!

That is why some independence is needed on the board, the board currently (according to companies office) consists of the major shareholders who as human nature dictates would obvuiously make the best decisions for themselves ahead of the company and other minorities. At this price it will be disastrous for them.

Yep - sorry. I took you to mean them separately. I totally agree that the existing shareholders are interested!

Alan.

Tony Two Gloves
24-02-2011, 03:19 PM
Yes we are into the last hour..........

If there are no more trades I think the conversion price will be around 0.11 the big question is how many will be issued? If there is $13M then that would almost be 120M new shares or 196M in total which means the majors would reduce to around 31%.

Tony Two Gloves
24-02-2011, 03:24 PM
Hey Enumerate, maybe you did knock Alan off his chair......I see he spelt his name wrong on his last post!!

Alan3285
24-02-2011, 04:10 PM
Hey Enumerate, maybe you did knock Alan off his chair......I see he spelt his name wrong on his last post!!

{Publicly Shamed}

Enumerate
24-02-2011, 05:16 PM
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
25-02-2011, 10:27 AM
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
25-02-2011, 11:45 AM
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
25-02-2011, 12:21 PM
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
25-02-2011, 12:23 PM
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
25-02-2011, 07:19 PM
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
25-02-2011, 10:07 PM
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
26-02-2011, 07:26 AM
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
26-02-2011, 09:28 AM
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
26-02-2011, 04:36 PM
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.

invessi
01-03-2011, 08:27 AM
NZF
28/02/2011 16:45
MEETING

REL: 1645 HRS NZF Group Limited

MEETING: NZF: Notice of special meeting of shareholders

NZF Group Limited (NZF) - Notice of special meeting of shareholders

NZF advises that it has sent the following "NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS" and "PROXY FORM" today to ordinary shareholders in NZF Group
Limited on the Company register as at 28 February 2011.

The Special Meeting of Shareholders will be held at on Monday 14 March 2011
at the Tamaki Yacht Club, Mission Bay, Auckland at 10:30am.

The ordinary resolution to be considered is outlined in the notice, however
in summary it will be for shareholders to consider the issue of up to a
maximum of 56,135,496 fully paid ordinary shares in the Company in relation
to NZF Capital
Noteholders who do not elect the Renewal Option for NZF Capital Notes by 5PM
10 March 2011.

Shareholders should note that the maximum figure above represents the total
number ordinary shares that may be issued in respect to Cap
ital Notes for
which an election notice is yet be received as at 24 February 2011 and
excludes mail that is currently caught up in the disruption resulting from
the Christchurch earthquake. It is expected that more election notices
electing the renewal option will be received before the extended
Notification Date of 10 March 2011(as approved by the Trustee).
End CA:00206224 For:NZF Type:MEETING Time:2011-02-28 16:45:29

Enumerate
01-03-2011, 08:50 AM
Clearly, the board does not believe that the shareprice will go much lower ... no "Death Spirals" here

Tony Two Gloves
01-03-2011, 08:52 AM
Just wondering Enumerate if the date has been extended to the 10/03/2011, presumably the VWAP calculation would be the 20 days following this date now?

Enumerate
01-03-2011, 10:00 AM
No, can't be - since conversion is on the 15th ... a hard and fast date in the Trust Deed. The Trustee has simply allowed the extension of the election date.

Tony Two Gloves
03-03-2011, 12:01 PM
Finally the real reason they stopped lending......

I think all this talk of a new partner etc were hot air and have received no further mention by NZF.


NZF
03/03/2011 12:53
CREDIT

REL: 1253 HRS NZF Group Limited

CREDIT: NZF: NZF Money Limited Long-Term Rating Lowered To "CCC",......

NZF Money Limited Long-Term Rating Lowered To "CCC" And Placed On "Watch
Negative" by Standard & Poor's

The Directors of NZF Group Limited (NZF) today confirmed that the credit
rating assigned to its wholly owned subsidiary NZF Money Limited (NZFM) had
been lowered to "CCC" and placed on "Watch Negative" by International Credit
Rating Agency Standard & Poor's (S&P).

In their press release, a copy of which is attached to this Market
Announcement,
S&P said:
"The rating action reflects our view that NZF's liquidity positioned has
weakened, largely as a result of a material rise in past due loans,
compounded by some volatility in debenture reinvestment experience.

Although we understand that the company is positioned to meet its liquidity
needs over the next few months from cash flows generated from the repayment
of a number of past due loans, in our v
iew NZF's liquidity position is
delicately placed. In our view, the company could run short of cash if loan
repayments are not progressed as anticipated; notwithstanding that forecast
loan repayments over this period are on loans where there is an unconditional
sale contract in place and NZF's confidence around prospects that loans will
be settled".

S&P also stated that their view had been influenced by the "company's limited
balance sheet cash position, the absence of committed external back-up lines
and concerns over ongoing business viability".

Chief Executive Officer, Mark Thornton said that the rating from S&P had not
come entirely unexpected, as the company no longer had a guarantee under the
New Zealand Deposit Guarantee Scheme. In addition, there were concerns over
the current economic outlook for New Zealand and negative bias towards the
New Zealand finance company sector, which was still going through a period of
turmoil.

Chairman of NZFM, Craig Alexander also said that
the increase in past due
loans was a direct result of the company's decision to purposely allow a
number of loans to expire at the end of loan facility agreements, in order to
keep its recovery options open, improve its ability to renegotiate revised
lending terms and conditions, and to control the sale and recovery process
where necessary.

The company's forecast liquidity position was based on a number of
unconditional sales contracts in place that are due to settle in the next two
months, which would result in the company sitting on significant cash
reserves.

As a result, the company anticipated returning to new lending within the next
6 months on current forecasts. The company also continued to comply with all
of its Trust Deed covenants and ratios, including its Capital Adequacy Ratio,
Gearing Ratio, Liquidity Requirements and Related Party Exposure Limits.

The company's reinvestment rate had also shown significant improvement
following the expiry of NZFM's guarantee under the
New Zealand Deposit
Guarantee Scheme on 12 October 2010. The reinvestment rate for the month of
February 2011 was 41.68%, which is consistent with the 12 month average of
35.34% and an average of 56.44% following the expiry of NZFM's guarantee
under the New Zealand Deposit Guarantee Scheme.

The CreditWatch negative listing and further potential downgrade commented on
by S&P in their press release, is related to potential delays that could
occur in cash flow concentrations over the next few months relating to
anticipated loan repayments. The Directors are however confident that the
unconditional sales contracts that are currently in place, and on which
deposits have already been paid by purchasers, will settle on time and that
this position will not eventuate.

NZFM continues to manage its business on a prudent basis and has met all of
its payment obligations to investors since it first offered secured deposits
in late 1999. NZFM would like to thank all of its long term loyal inve
stors
for their continued support.
End CA:00206407 For:NZF Type:CREDIT Time:2011-03-03 12:53:51

Xerof
03-03-2011, 06:32 PM
Yep, start reading the last rites for this one - once Derryl and Peter (S&P) get their hooks into constant downgrades, and negative creditwatches, they don't have a show. They will be reporting to S&P weekly, with reviews now monthly

This reads exactly as it did with SCF - positives are highlighted by those charged with saving the institution - no lending until stabilised, buyers in the wings, retention rates holding up well, continue to meet all obligations - but at the end of the day 58% of the debentures are being repaid each and every day, asset sales won't keep up with outflows and usually a CCC negative is the death knell.

bye bye NZF IMO

and if you think it can't happen to Wrightsons Finance, Marac, and the like, think again - these books are crumbling around their ears

minimoke
04-03-2011, 07:58 AM
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.

invessi
04-03-2011, 08:32 AM
TTG says; "Finally the real reason they stopped lending......

I think all this talk of a new partner etc were hot air and have received no further mention by NZF."


Quote on Deposit Rates site this morning:

"Earlier this week, Thornton said discussions with a potential business partner are continuing but the Christchurch earthquake's impact on NZF's market, predominantly in the Auckland region, has yet to be understood.

NZF has been working to attract much-needed fresh equity since early last year"

Tony Two Gloves
04-03-2011, 08:34 AM
It has a similar feel to ALF, if Mini's figures come out around those levels that would be around 54M new shares issued. I think once note holders get those shares as with ALF the one's that sell early will get the best price. The one's that hold will see a gradual decline espically if the S&P rating heads further south and the banks start re assessing their position with NZF as the debenture holders have.

There are some big losers here, looking back when Huljich was issued shares (5M shares at .53 cents) cost $2,650,000 value at 0.06 $300,000 - bugger! The other one I came across was the purchase of Approved Mortgages 2.66M shares at 0.45 cents origianl value 1.2M, current value $160,000, luckily for this guy according to latest shareholder list at the Companies Office he only has 450,000 left so hopefully he sold some at a good price.

Alan3285
04-03-2011, 09:19 AM
It has a similar feel to ALF, if Mini's figures come out around those levels that would be around 54M new shares issued. I think once note holders get those shares as with ALF the one's that sell early will get the best price. The one's that hold will see a gradual decline espically if the S&P rating heads further south and the banks start re assessing their position with NZF as the debenture holders have.

There are some big losers here, looking back when Huljich was issued shares (5M shares at .53 cents) cost $2,650,000 value at 0.06 $300,000 - bugger! The other one I came across was the purchase of Approved Mortgages 2.66M shares at 0.45 cents origianl value 1.2M, current value $160,000, luckily for this guy according to latest shareholder list at the Companies Office he only has 450,000 left so hopefully he sold some at a good price.

If you were the buyer, I suspect you would not be so 'hopeful' :-)

Alan.