NZF Group (NZF and NZF010)

[blackcap]

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]

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]

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]

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]

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]

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]

....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]

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]

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]

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.