Archive | Securities – NZ

PFI vote strongly in favour of internalisation, and building sale settles

Property for Industry Ltd shareholders voted 94.4% in favour yesterday of paying $42 million to internalise the NZX-listed company’s management.

The same management team will stay in place, making some wonder why the transaction was needed at all.

But deputy chair Anthony Beverley said benefits included the control on expenses, dealing with conflicts and strategic benefits. He said the return to shareholders would from the investment would flow through reduced expenses and higher profits.

NZ Shareholders Association chair John Hawkins told the PFI meeting the association had seen lower numbers than the 6.5% accretion to shareholders that the independent report by Northington Partners ascribed to the internalisation, but all the other predictions were still accretive.

And then he added: “I am confident that if shareholders reject this deal the management contract will be sold to a third party – that’s from some of the parties we have spoken to.”

And that’s the crux of the internalisation. PFI had an opportunity to control the future of its management, whereas sale of the management contract to a third party could have led to a far different future.

There were some quibbles that owners of the present manager, PFIM Ltd, would switch to internal contracts yet would still be allowed to conduct other business from the company office, but Mr Beverley said the external contract allowed that and the new contract would require them to give PFI priority.

The vote was held at PFI’s annual meeting, where the operational highlight was a presentation by general manager Simon Woodhams on the returns the company had achieved from its $28.5 million acquisition of the Sistema Plastics Ltd portfolio of 5 Penrose properties in 2015.

Sistema moved last year to new premises at Ihumatao, near Auckland Airport, after a period leasing back its Penrose premises. PFI has signed long-term leases on 3 of the Penrose buildings, sold one and has the fifth building still vacant.

The sale of 65 Hugo Johnston Drive to Crown Equipment Ltd for $14.25 million, up from PFI’s August 2015 acquisition price of $11.01 million, settled on Monday.

Earlier stories:
29 May 2017: Northington sees big gain for PFI from internalisation
24 May 2017: IRD makes tax ruling relating to PFI internalisation
1 May 2017: PFI sells one & leases 3 of 5-property Penrose portfolio
3 April 2017: PFI proposes internal management after 6 years of external

Attribution: Annual meeting, company releases.

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NZF passes resolutions to become Blackwell

NZX-listed shell company NZF Group Ltd’s shareholders passed all 9 resolutions at a special meeting yesterday, called to implement a capital & organisational restructure which will see it formally become part of Taiwanese wholesale investor Chai Kaw Sing (Michael Chai)’s Blackwell Global Group.

The restructure is scheduled to be settled in the second week of July.

Under the proposal, NZF will change its name to Blackwell, Mr Chai & 2 local associates – real estate agency owner James Law & lawyer Ewe Leong Lim – will become directors, current director Mark Thornton will revert to his role as chief executive and the 2 directors who’ve worked on keeping NZF alive, chair Sean Joyce & lawyer Craig Alexander, will stay on as independent directors.

Mr Chai will invest $2.5 million (at 0.8 of a cent/share) to capitalise NZF and will pay the existing directors the fees they haven’t taken while they’ve been searching for a future for the company (about $75,000 each).

As Blackwell, NZF will launch a new finance company operation, acquire assets related to a derivative trading operation and launch a new derivatives trading operation.

It will raise new debt through the issue of up to $3 million of convertible notes and secure third-party debt finance through the issue of up to $6 million of secured bonds.

Earlier story:
9 June 2017: Listed shell NZF calls meeting on future as Blackwell finance & derivatives business

Attribution: Company release.

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Kiwi Property seeks $161 million new equity

Kiwi Property Group Ltd announced a $161 million equity-raising on Monday through a fully underwritten pro rata entitlement offer.

The $1.36/share issue price reflects a 4.5% discount to the theoretical ex-entitlement price of $1.424/share. The theoretical ex-entitlement price equals the average price of 118,132,021 new shares at the application price of $1.36 and 1,299,452,240 existing shares at $1.43, which was the closing price on the NZX on 16 June.

Kiwi Property chief executive Chris Gudgeon said the NZX-listed company intended to use the net proceeds initially to pay down bank debt and reduce gearing, before being used to fund potential investment & development opportunities, including the potential expansion & improvement projects at Sylvia Park, Northlands, The Base, and in the longer term at Drury.

Under the offer, eligible Kiwi Property shareholders will be entitled to acquire one new share for every 11 existing shares held on the record date, which is today.

The institutional component of the offer will be accelerated and occur over the next 2 days.  Settlement & allotment of new shares is scheduled for Friday 30 June.

The retail component of the offer will open tomorrow for eligible retail shareholders with a registered address in New Zealand or Australia and close on Monday 10 July. Settlement & allotment of new shares is scheduled for 17 July.

Under the offer, there is no rights trading. Instead, new shares not taken up or attributable to ineligible shareholders will be offered to institutional investors through 2 bookbuilds run by the joint lead managers, one for the institutional offer and one for the retail offer.

Any premium achieved above the application price for the new shares in each of the bookbuilds will be shared on a pro rata basis (with no brokerage costs deducted) between those shareholders who don’t exercise their entitlements or who are ineligible to do so.

Due to the timing of this offer, Kiwi Property’s dividend reinvestment plan has been suspended for the final dividend payable tomorrow. Shareholders who elected to participate in the plan will be paid the dividend instead.

Attribution: Company release.

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Summerset sees bonds as helpful diversification

Summerset Group Holdings Ltd set an interest rate last week of 4.78%/year for its $100 million issue of secured, unsubordinated fixed-rate bonds. The issue includes $25 million of oversubscriptions. There’s no public pool.

The offer closes on Thursday 6 July and allotment will be on Tuesday 11 July. The 6-year bonds have a maturity date of 11 July 2023.

Summerset chair Rob Campbell said the transaction was a significant milestone for Summerset, being its first domestic regulated bond issue and the first for the New Zealand retirement village & aged care sector: “The proceeds will be used to reduce existing bank debt to $211 million, leaving significant headroom within the $600 million facility.

“This provides further diversification of funding sources and tenor for the group and provides strong levels of certainty for future years for funding. The bonds complement existing syndicated loan facilities which were refinanced in March.”

Attribution: Company release.

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Ryman plans retirement village for Lincoln Rd

Ryman Healthcare Ltd announced plans on Friday for a new retirement village on a 4.5ha Lincoln Rd site in Henderson.

The land is part of Laidlaw College’s Henderson campus, but is surplus to the college’s needs. Laidlaw College is an evangelical theological college, formerly the Bible College of NZ.

Laidlaw College Foundation chair Graham Burt said: “Ryman is an ideal organisation to become our new neighbour. We feel very much part of the Henderson area having been here for over 50 years and we’re keen to ensure a good fit for both ourselves & the community as a whole.’’

Ryman Healthcare group development manager Andrew Mitchell said the company intended to redevelop the site as a resort-style retirement village which would be home to over 400 residents.

The village would offer independent retirement housing, a full range of aged care services including serviced apartments, and resthome, hospital & dementia care.

Ryman group sales & community relations manager Debbie McClure said the village would be named in honour of a West Auckland local and suggestions were welcome.

The village will be Ryman’s 11th in Auckland. The company is developing villages at Hobsonville, Greenlane, Lynfield & Devonport and has existing villages in St Heliers, Remuera, Howick, Pukekohe, Birkenhead & Orewa.

Attribution: Company release.

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Vital buys another Sydney hospital

The Vital Healthcare Property Trust has bought a Sydney private mental health hospital, The Hills Clinic, for $A30.3 million. Settlement is expected to occur in July. It comes a fortnight after the NZX-listed Vital bought a rehabilitation hospital in north Sydney suburb Chatswood, the Hirondelle Private Hospital, for $A23.5 million.

The Hills will be run on a 30-year lease by Healthe Care Australia Pty Ltd, Australia’s third largest corporate private hospital operator and pan-Asian healthcare services group, now owned by the Singapore-based Luye Medical Group Pte Ltd. Healthe Care runs Hirondelle on a 25-year lease.

Vital management company chief executive David Carr said today The Hills, in Kellyville, 40km north-west of the Sydney cbd, was modern & innovative. It’s a 2-level purpose-built mental health hospital offering specialist inpatient programmes.

Built in 2011, The Hills is a 59-bed private inpatient facility, including a medical clinic with 8 consulting rooms & about 30 referring clinicians. Mr Carr said it was differentiated by its dedicated youth mental health programme providing accommodation for adolescents with drug, alcohol, depression & anxiety disorders.

“The Hills Clinic is Vital’s fifth mental health hospital in Australia and its first in New South Wales and directly supports our scale & diversification strategy. The Hills site has expansion capability, with potential for an additional 24 beds, which fits nicely with Vital’s philosophy of supporting its operating partners as population growth & wider demand for mental health services increases over time”.

Earlier story:
2 June 2017: Vital buys Sydney hospital

Attribution: Company release.

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Listed shell NZF calls meeting on future as Blackwell finance & derivatives business

NZX-listed shell company NZF Group Ltd has called a special meeting of shareholders to consider the implementation of a capital & organisational restructure which will see it formally become part of Taiwanese wholesale investor Chai Kaw Sing (Michael Chai)’s Blackwell Global Group.

Mr Chai’s investment in NZF since February 2016 has kept the listed shell alive. NZF entered into a conditional implementation deed with Blackwell last November, and the proposal for the meeting on Thursday 22 June sticks to that plan.

Under the proposal, NZF will change its name to Blackwell, Mr Chai & 2 local associates – real estate agency owner James Law & lawyer Ewe Leong Lim – will become directors, current director Mark Thornton will revert to his role as chief executive and the 2 directors who’ve worked on keeping NZF alive, chair Sean Joyce & lawyer Craig Alexander, will stay on as independent directors.

Mr Chai will invest $2.5 million (at 0.8 of a cent/share) to capitalise NZF and will pay the existing directors the fees they haven’t taken while they’ve been searching for a future for the company (about $75,000 each).

As Blackwell, NZF will launch a new finance company operation, acquire assets related to a derivative trading operation and launch a new derivatives trading operation.

It will raise new debt through the issue of up to $3 million of convertible notes and secure third-party debt finance through the issue of up to $6 million of secured bonds.

NZF released an explanatory memorandum & an independent appraisal yesterday. The proposed subscription price of 0.8 of a cent is above the original price Mr Chai paid last year, (0.78125 of a cent) and far above the, asset backing as at 30 September 2016, which was a negative 0.1c/share.

The independent view

The independent report by Simmons Corporate Finance Ltd (Peter Simmons & Annette Tills) noted: “The non-associated shareholders currently hold shares in a company with total equity of negative $398,000 as at 31 March 2017 and whose shares have been suspended from trading on the NZX main board since 4 April 2014. If the company were to be liquidated, there would be no return to the non-associated shareholders.”

If they reject any one of the 9 resolution before them, the restructure won’t proceed and NZF would either remain as a listed shell or be liquidated.

Not surprisingly in those circumstances, the Simmons report concluded: “We consider the issue price of the shares under the Blackwell Associates allotment and the convertible notes conversion of 0.8 of a cent/share to be advantageous (and therefore fair) to the non-associated shareholders as it is higher than our assessment of the current value of NZF’s shares.”

About Blackwell

Mr Chai has 2 New Zealand companies now, Blackwell Global Investments Ltd & Blackwell Global Trust Ltd, both owned through a British Virgin Islands company also called Blackwell Global Investments Ltd and both registered in New Zealand as financial service providers, and he has a London-registered company, Blackwell Global Investments (UK) Ltd.

Blackwell NZ said it offered an online trading platform (Blackwell Trader), investment products & research services to a group of private high-net-worth individuals. It was also licensed & regulated by the Cyprus Securities & Exchange Commission, and has been expanding its brokerage internationally.

New directors

James Law Realty Ltd founder & chief executive James Law has 10 years’ experience in the business and commercial & residential real estate sector, and holds an MBA and a BCom degree in marketing & information systems. According to the explanatory memorandum, Mr Law’s expertise is in “time management, technology, business and commercial & residential real estate. With James’ involvement, the group can benefit from his intimate knowledge in the area of mezzanine financing and obtain insights to the key developments of the property development sector in New Zealand, which is believed to have a direct influence on the group’s core business in mortgage lending.”

The other proposed new director, Ewe Leong Lim, is an Auckland partner at law firm Anthony Harper specialising in corporate & commercial law. He has MPhil (commercial laws with first class honours) & LlB degrees LLB Ewe Leong is a partner of Anthony Harper, Lawyers, and specialises in corporate & commercial matters. His practice areas include acquisitions, divestments, cross-border investments, securities and governance matters. He is a member of the Institute of Directors and Governance New Zealand. Ewe Leong holds a Bachelor of Laws and Masters of Philosophy (Commercial Law) (Hons) from Auckland University and has been practising law since 1987.

A Huljich creation

NZF listed as NZ Finance Holdings Ltd in 2004, with Huljich family interests in a cornerstone role. Its business was focused on mortgage lending.

It struggled through the global financial crisis. Then, at the end of 2010, its affairs began to unravel. Former chair Richard Waddel resigned on 31 December 2010, founder & former managing director John O’Callaghan resigned on 15 March 2011 because of his continuing ill health, and director Peter Huljich resigned on 12 April 2011, a fortnight after his private company, Huljich Wealth Management (NZ) Ltd, sold its KiwiSaver business and a fortnight before he was back in court on Securities Commission charges of misleading prospective investors by misrepresenting the investment performance of the scheme’s funds in offer documents in 2008-09.

Mr Huljich, now out of the boardroom, was fined in December 2011. In the meantime, NZF withdrew its prospectus and subsidiary company NZF Money Ltd went into receivership. In 2012, NZF and its partner in the Pero Mortgage businesses, Liberty Financial Ltd, went to battle and NZF Money’s receivers got a freezing order over the listed parent’s assets.

Link: Blackwell

Earlier stories:
16 November 2016: NZF set to become part of Blackwell derivatives trading group
27 February 2016: Taiwanese investor keeps NZF Group alive
12 June 2015: 12.8c return estimate for NZF noteholders
25 May 2015: NZF appoints administrator
Propbd on Q Sun10May15 – Kerr v Barnes stoush, NZF chooses cleanest exit, Warehouse bond, Warehouse Q3 sales up
29 April 2015: Propbd on Q W29Apr15 – Kirkcaldie’s loss, new levy on SkyCity, Allied Farmers placements, Argosy revaluation & sale, NZF deal falls over
11 March 2015: Inventory Technologies raises capital ahead of proposed NZF reverse takeover
7 August 2014: Propbd on Q Th7Aug14 – NZF decider lacks quorum, QV sees value slowdown, 3 apartments sell, all passed in at Barfoots
4 April 2014: NZF board concedes restructure defeat, will recommend liquidation

Attribution: Company release, documents.

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Updated: Commission files 29 charges against Steel & Tube over mesh

Published 7 June 2017, updated 8 June 2017:
The Commerce Commission said on Wednesday it had filed 29 charges against Steel & Tube NZ Ltd for making false & misleading representations about its steel mesh product known as SE62.

Steel & Tube responded, which appears at the foot of this article.

The commission said it had filed the charges in the Auckland District Court under the Fair Trading Act. They relate to conduct between 1 March 2012 & 6 April 2016 and were part of the commission’s wider investigation into steel mesh.

The commission said in today’s release: “The charges allege that Steel & Tube made misleading representations on their batch tags, batch test certificates, advertising collateral & website that SE62 was 500E grade steel, when it was not. The charges also allege that false & misleading representations were made by Steel & Tube that SE62 steel mesh had been independently tested & certified, when it had not. This included using the logo of an independent testing laboratory on SE62 test certificates when the product had not been tested by the laboratory.”

The commission also filed charges this year against Timber King Ltd & NZ Steel Distributor Ltd in relation to false & misleading representations about 500E steel mesh. The commission said these companies had entered guilty pleas and would be sentenced in August. The commission expects to lay charges against one other company, and is continuing its investigations into one more company.

Background

The commission began investigating after receiving a complaint on 5 August 2015 raising concerns about the validity of claims being made by 3 companies selling steel mesh in New Zealand. This complaint related to problems with a particular size of 500E mesh, which is ductile steel mesh often used in concrete slabs like house foundation slabs & driveways.

The Australia/NZ standard (AS/NZ 4671:2001) mandates various physical characteristics required of steel mesh, and the testing methods that must be applied during their production. In April & May 2016 the commission entered into enforceable undertakings with 3 companies that ensured 500E grade steel mesh could only be sold once it passed specific stringent testing.

In November 2016 the Government made changes to testing requirements, increasing the number of samples which need to be tested, clarifying how that testing is done and requiring testing be done by internationally accredited testing laboratories. The changes were fully implemented on 30 May 2017.

Steel & Tube responds

Steel & Tube said it had been co-operating with the commission throughout its investigation and was aware of the decision to file charges: “The commission’s charges against Steel & Tube in regards to compliance with the testing standard relate to the application of testing methodologies only, not the performance characteristics of the seismic mesh.

“Steel & Tube is working with the Commerce Commission to reach an appropriate resolution of the charges, however cannot comment further as the matter is before the court. Steel & Tube continues to stand behind its products and, since April 2016, all of the company’s seismic mesh has been tested externally by accredited laboratories.”

Earlier stories:
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Commission release.

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Summerset sets indicative margin for bonds

Retirement village developer & operator Summerset Group Holdings Ltd has set the indicative margin range above the 6-year swap rate for its $100 million bond issue at 1.85-2%/year, subject to a minimum interest rate of 4.7%/year.

Summerset is offering $75 million of bonds, with the ability to accept up to $25 million of oversubscriptions. The interest rate will be decided after the bookbuild process expected to be completed on Tuesday 14 June.

The offer is expected to open on 15 June and close on 6 July. There’s no public pool.

Attribution: Company release.

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NPT profit eaten up in battle over its future

Small listed commercial property owner NPT Ltd increased its gross rental income by 1% in the year to March, but saw its net after-tax profit plunge by 63% through costs associated with the battle for its future.

Control of the company shifted post-balance date to listed funds management specialist Augusta Capital Ltd.

At a special meeting in April, NPT shareholders voted to hand the company’s management contract to Augusta, defeating a proposal for Kiwi Property Group Ltd to take over.

Augusta lifted its NPT stake to 18.85% before the meeting, and won the vote with the support of associates.

Former Ngai Tau Property Ltd director Tony Sewell had taken over the chair at NPT from Sir John Anderson in March, but was ousted in April and the new chair is Bruce Cotterill. Augusta chair Paul Duffy and former Tramco Group Ltd chief executive Allen Bollard also joined the NPT board, Jim Sherwin was voted out and the one director to stay on is Carol Campbell.

Mr Cotterill said on Wednesday the new board was undertaking a thorough analysis of the 2018 financial year’s business plan before confirming guidance on the cash dividend for the year, and was also working on a plan to take NPT forward. He expected to release an update before the annual meeting in August.

Mr Cotterill said NPT’s results for the financial year just ended were negatively impacted by the costs associated with the Kiwi Property proposal that didn’t proceed and assessing other proposals, primarily for legal fees, due diligence, financial analysis and holding the April special meeting. The total cost incurred in the 2017 financial year was $1.339 million and a further $348,000 has been incurred in the 2018 financial year.

“There are still a number of challenges ahead of us that are mostly a consequence of a lack of scale. The board is committed to improving returns to shareholders and is focused on advancing the necessary steps in support of this goal as quickly as practical. Once a plan for NPT’s future is sufficiently developed, the board looks forward to engaging with shareholders to seek their views before moving forward with any significant course of action.”

Key financial performance points (2016 figures in brackets):

  • Gross rental income up 1% to $17.15 million ($16.98 million)
  • Net profit after tax down 63.1% to $3.1 million ($8.4 million)
  • Distributable profit before tax down 1.4% to $7.2 million ($7.3 million)
  • Distributable profit after tax down 0.2% to $6.1 million ($6.1 million) or 3.78c/share (3.79c/share)
  • Loan:value ratio 33.2% (28.2%)
  • Net tangible asset backing 72c (74c)
  • Cash dividend maintained at 3.6c/share for the full year, 0.9c/share for fourth quarter

Property portfolio update

NPT undertook several substantial capital investment projects during the year, and chief executive Tony Osborne said some of that contributed to an increase in rental revenue, particularly at Eastgate & 22 Stoddard Rd: “Further gains will be realised as vacant space at Eastgate & the AA Centre is leased.”

Highlights:

  • Net rental income up 2.6%
  • Increased valuations at Eastgate, 22 Stoddard Rd & AA Centre, offset by reduction in valuations at Print Place & Heinz Watties; overall loss of $1.7 million after taking capital expenditure into account
  • Occupancy at 96.0% (97.1%)
  • Weighted average lease term 4.6 years (5.4 years)
  • 22 Stoddard Rd back to 100% occupancy
  • Refurbishment of AA Centre level 8 nearing completion.

Attribution: Company release.

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