HGH - Heartland Group Holdings

**Snow Leopard** · 09-11-2015, 02:06 PM

Originally Posted by Roger

...Looking at the text of what HNZ had to say the other day I think people may be getting a little ahead of themselves thinking there could be $100m repaid to ordinary shareholders. Nothing in the text of the news release would suggest that,...

from Heartland announcement

...Accordingly, Heartland will seek shareholder approval at the upcoming Annual Meeting to return an amount of capital within a range of not less than $58 million (which equates to 10% of Heartland’s average market capitalisation over the 20 trading days prior to this announcement) and not more than $100 million. ...

Best Wishes
Paper Tiger

**Beagle** · 09-11-2015, 03:38 PM

Probably too busy calculating what a $75m exercise in financial engineering might be worth to the potential value of ordinary shares (if they can execute it), and glossed over the detail, see post #6648.

There's plenty more in there regarding a possible acquisition of MTF, (as you know), so a substantial share capital return even if they get the Tier 2 issue done successfully is far from a done deal already.

**Snow Leopard** · 09-11-2015, 03:58 PM

As they say: the devil is often in the detail.

I would not bother doing anymore sums, it is all highly unlikely to be EPS negative and is probably worth at least 2%.

Best Wishes
Paper Tiger

**Beagle** · 09-11-2015, 04:39 PM

Devil sure is in the detail, emphasis added. I guess we don't want the unemployment rate to blow right out or the GDT auction prices to collapse back down then do we ?

The exact amount of excess capital to be returned to shareholders would
depend on the extent of oversubscriptions that may be received under the Tier
2 Capital issue and the business and economic factors present at the time the
capital return was conducted. Accordingly, Heartland will seek shareholder
approval at the upcoming Annual Meeting to return an amount of capital within
a range of not less than $58 million (which equates to 10% of Heartland's
average market capitalisation over the 20 trading days prior to this
announcement) and not more than $100 million.

However, circumstances may arise whereby the return of capital may not
proceed even if it is approved by shareholders. In summary, this would be if
the Tier 2 Capital issue did not proceed (or did not complete successfully)
or if the board identified an investment requirement or opportunity prior to
the return of capital being undertaken (including an acquisition of Motor
Trade Finances Limited), which leads the board to consider that a return of
capital is no longer the most appropriate use of the Continuing Company's
excess capital.

How have they gone in terms of the HER business acquisition being EPS accretive ?

So the 4.9 cent net benefit I calculated isn't a certainty by any means..oh wait, the market has already priced that in fully...people counting their chickens before they arrive ?

**gv1** · 10-11-2015, 12:15 PM

Why would they want to return capital when dairy outlook doesn't look good.

**percy** · 10-11-2015, 01:35 PM

Originally Posted by gv1

Why would they want to return capital when dairy outlook doesn't look good.

Because they have a low exposure to dairying,and having made adequate provisions against impairments,most probably don't want to take on more dairying loans.

**Snow Leopard** · 10-11-2015, 02:24 PM

Originally Posted by gv1

Why would they want to return capital when dairy outlook doesn't look good.

If I open my fridge door, there, sitting right in the middle, at the front, of the second shelf from the top is an unopened 250g block of Mainland Vintage.

It does not get much better than that.

But seriously:

If and only if they raise this $50 to $75 of Tier 2 capital (which would equate to about 2% of capital adequacy for the larger 2016 version of the bank)
and they fail to find something EPS positive to buy with it
then they will have more (money, not cheese) kicking around than is sensible and they will very graciously let me have some of it.

HNZ will make provisions for impairment based on the reality of the situation and maintain its capital position in order to remain within its RBNZ requirements given their analysis of future economic possibilities.

So all is probably OK, but everything comes with some degree of risk.

Best Wishes
Paper Tiger

**percy** · 10-11-2015, 02:33 PM

MTF or any other acquisition will have to be fantastic to be better than the up to $100mil share by back.!!!

**Snow Leopard** · 10-11-2015, 02:47 PM

Originally Posted by percy

MTF or any other acquisition will have to be fantastic to be better than the up to $100mil share by back.!!!

It depends upon the interest rate they pay on any new Tier 2 and at what price they buy back existing shares. (The announcement mentions 10% for $58 which is only $1.225, but do not take that as what will be).

But a $50m Tier 2/Tier 1 swap is about 2.7% EPS positive
and a $75m swap is about 4.2% EPS positive

Both with Tier 2 paying 6% and capital return at $1.30 a share

Best Wishes
Paper Tiger

**Snow Leopard** · 10-11-2015, 03:26 PM

apropos of my previous post Harvey Specter makes a highly relevent comment on the CEN thread about pro-rata buybacks needing to be over 10% of market cap and I will presume that this would apply here.

If this is true then do not bid the price up too much; any buy-back could become un-affordable.

Best Wishes
Paper Tiger