NZF Group (NZF and NZF010)

[minimoke]

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]

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]

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]

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]

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]

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]

And someone did!!

[Tony Two Gloves]

WOW someone listened to me Now if only I could get the wife to do the same thing............

[Alan3285]

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]

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