You are right of course about the dilution and outcome.
It is the first time in decades of investing that I have come across such a rights issue - as in one right for 2 shares!
Companies and underwriters structure capital raising to achieve certain outcomes :
1. The companies to get the capital they want and/or need at the cheapest cost and least dilution to existing shareholders,
2. Underwriters to get existing shareholders to take up the issue and simply collect their fees. If they end up with shares, they want the shares to be as cheap as possible so they can make a quick gain.
The way that this AIR capital raise is structured, it appears to be a compromise which implies to me that NZ government had a lot to say & influence about/over the CR.