Vector Limited (VCT)

[Drunk_Russian]

Is it worth buying into Vector bonds now?

Do they become more valuable in anticipation of preferential treatment in an IPO?

[StainlessSteelRat]

quote:Originally posted by wsheridan

If you go through the IPO then they will use the funds raised to repay debt.... meaning the very concern you had about potential high debt will no longer exist [B)]

I'm not so sure. VCT has $1.9bn in term liabilities (D/E of 66%), which will increase by $800m if they buy 66% of NGC, or $1.3bn if they achieve a full takeover.

So, D/E ratio will become $2.7bn on assets of $3.7bn (incl 66% of NGC) or $3.2bn on assets of $4.3bn (100% of NGC).

They have stated that they will float 25% (presumably of the total) which will generate either $900m or $1.1bn. If they use all of this to reduce their debt, the D/E will stand at 48% (regardless of the amount of NGC bought).

With investors becoming more "risk averse", especially regarding debt, this will still be a high ratio and one that will bear closer attention, especially given a current return on equity of 6%.

For me, VCT is a salient lesson for those who are fervent proponents of public ownership. They are wallowing under a mountain of debt, and it may well take more than a quick sale of the family jewels to get them on track.

[whatsup]

With the falling in yield of V bonds I assume that the lower they go the more they cost? at what point (price/cost) are they not worth buying? What are/will be the terms of any intitlement to Victor shares, 1 for every 2 bonds held + a 10% discount to the public issue price? after which I suspect that the bonds will head back up to their former price approx 8%, will the whole exercise be still worth it I wonder????

[wsheridan]

I see the Auckland Energy Consumer Trust agm is tomorrow.... is anyone able to go to this?
I'd be interested to see what the fireworks show is like

[ananda77]

whatsup:

According to Vector, if the IPO happens, which is very likely, the IPO will most likely happen at the end of 2005, which means a buyer can expect

- 3 more interest payments up to the 15-December-2005

and needs to pay at a current yield of 6.30%

- accrued interests since 15-June-2004 to now
- approx. 6.7% premium on capital
- brokerage

This means that any buyer at the current yield will still be making a small amount of money via interests payments...
but the cream on the cake will be a guaranteed entitlement shares in the IPO at a 2.5% discount...
and a very successful IPO it will be!!

Read: http://www.nzherald.co.nz/business/b...thetickercode=

[nelehdine]

Where will CEN shares be by the time that Vector IPO's ... and CEN will pay excellent divs in the meantime !! That 2.5% discount could turn out to be a very expensive carrot !!!

Disc: HOLD CEN

[ananda77]

nelehdine:

We will see...but in terms of pay-out, cen-dividend = 5.60%, while vector bonds still pay 6.3% for the time remaining.

Also remember, successful IPO's can return 30%+ on the day of listing.

[ananda77]

Furthermore:

Imagine your auntie from Russia sends you $50.000 and because you are a very good person, GOD/Godess, in a moment of infinite love, grants you a sure entitlement in Vector shares. The shares are listed at an issue price of $2.50.

20.000 shares = $50.000.

Based on a current yield of 6.3% = approx. $1.10/bond, a bondholder buys

20.000 shares = $44.000

(because of the conversion ratio $0.50 of share for $1.00 of bonds, in order to get 20.000 shares a person needs to hold 40.000 bonds)

Consequence: Any person who thinks Vector shares will take the opportunity now to get them via the bonds.

[Snow Leopard]

quote:
Vector announced today that it has reached an agreement with the Australian Gas Light Company (AGL) to directly purchase its majority stake in NGC Holdings Limited (NGC) at $2.91 per share.

Vector Chairman Michael Stiassny says the company is very pleased with the outcome which he says represents a further milestone in the development of a key, New Zealand focused infrastructure management company.

Vector will now be making a full takeover offer to all NGC shareholders within the timeframes set down by the Takeovers Code. AGL will sell to Vector under this offer.
The offer is still conditional upon gaining approvals from the Commerce Commission.

Beyond the full takeover offer, Mr Stiassny says Vector is looking forward to working with the NGC Board in continuing to successfully deliver leading energy services within the New Zealand market.

Ends

Hoepfully take2 will get past the CC

[ananda77]

...in the meantime vector bonds trading at a yield of 6.25% as institutions collect them for the IPO