HGH - Heartland Group Holdings

[winner69]

Maybe 12% of the shares bought?

Heck what will eps be then - times 12 gives something more than 130

[iceman]

Maybe 12% of the shares bought?

Heck what will eps be then - times 12 gives something more than 130

Could even be a safer bet than AIR

[Baa_Baa]

Another very positive announcement by HNZ.
A simpler structure will save time and money.
Bond issues are very popular at present and depending on terms I would expect HNZ's will be oversubscribed.So $75mil .
So we are in a win win situation.Buy MTF if it stacks up,and we increase eps.Walk away from MTF and do a larger share buy back which too will increase eps.
Couta1.No details yet,however you will be free to buy HNZ shares on market with the cash HNZ pays you for your "return of capital shares" HNZ brought from you. You end up with a bigger slice of the pie.
Mouse.You're onto it.!! lol.

Can someone explain please why the bank borrows money through a tier-2 raise then has too much cash so cancels shares and pays out borrowed cash to shareholders. What's the point, or have I just got this wrong?

[winner69]

Can someone explain please why the bank borrows money through a tier-2 raise then has too much cash so cancels shares and pays out borrowed cash to shareholders. What's the point, or have I just got this wrong?

It's called capital management or financial engineering - mainly to get financial/capital ratios looking better

Often the motivation for doing this stuff is a means to boost management bonuses

[Baa_Baa]

It's called capital management or financial engineering - mainly to get financial/capital ratios looking better

Often the motivation for doing this stuff is a means to boost management bonuses

Is there any advantage or disadvantage to shareholders?

[couta1]

Is there any advantage or disadvantage to shareholders?

The bondholders rank ahead of shareholders in event of a default, but that's standard for this sort of capital raise.

[winner69]

Is there any advantage or disadvantage to shareholders?

Most would say one good thing is EPS increases (less shares) so if earnings multiplies remain the same the share price will be higher

Is a bit of a balancing act because profits are impacted to sum degree by higher interest expenses - hence the need to 'engineer' the right proportions to ensure it is favourable.

Some commentators call share buy backs as 'wealth extraction' (returning money to shareholders) as opposed to 'value creation' (making the company more valuable)

[Beagle]

What they're doing here makes good common sense and will give them financial headroom to take advantage of opportunities and face the challenges that lie ahead.
Baa Baa - In effect there's a value shift from those people who invest in a Tier 2 capital investment to those investing in the ordinary shares. (I would suggest many people investing in a Tier 2 capital compliant fixed interest opportunity don't understand the risks they're taking especially in regard to the Reserve Bank's open bank resolution). Stocks on a Pe of about 11.5 = 8.7% earnings yield...issue 75m debt at say 6% and in effect there's a value shift of about 2.7% on $75m = $2m per year of extra value for ordinary shareholders. By cancelling a certain number of shares they're able to increase EPS marginally on the remaining shares.

An extra $2m a year of earnings at a PE of circa 11.5 = $23m..devided by 470m odd shares = 4.9 cents a share and what do you know that's what the SP is up by today.
That said some of the senior bankers in the company will probably get a nice juicy bonus for boosting the EPS so how much value shareholders actually see remains to be seen, as does whether they get the issue over the line.

Overall though it looks like a sound move as does streamlining of the corporate structure which will add some efficiency.

[percy]

Is there any advantage or disadvantage to shareholders?

A big advantage to shareholders.
Less shares on issue mean we own a larger slice of the pie,and ROE and EPS improve which means HNZ will have a greater capacity to pay increasing dividends.
I look at it this way,HNZ pay 5% on bonds ,the interest is deductible, and they use the funds to replace excess shareholders equity, and can earn return on those funds of over 11%.
What remains is HNZ retain a strong equity ratio.

[winner69]

I hope that none of the female directors of both entities don't lose out with the restructure.