View Full Version : Air New Zealand saved..........for now.

4th Oct 2001, 05:35
04/10/01 - Air New Zealand gets Government cash, pays off Ansett

The Government has agreed to inject up to $885 million into the ailing Air New Zealand in a rescue package that will see taxpayers taking an 83 per cent stake in the airline.

Air New Zealand is to be recapitalised in a two-phase loan and equity investment by the Government, under the terms of an agreement reached between the Government, the Company, and its major shareholders — Brierley Investments Limited and Singapore Airlines Limited.

There will be an initial Government loan of $300 million that will later be converted to shares at 24 cents a share.

A second payment of $585 million will be made at a share price to be determined later.

Air NZ will also pay its collapsed Australian subsidiary Ansett $A150 million ($184.2 million) in settlement of claims the two airlines had made against each other.

The first phase of the recapitalisation is expected to be finished by October 19.

The airline said unaudited shareholder funds at August 31 were $506 million. Since then, the company had further losses of $350 million arising from the closure of Ansett.

Shareholder funds are estimated at $156 million, before taking into account the trading result for September, which will not be know for several days.

Air NZ acting chairman Jim Farmer said in the statement that the airline was grateful for the cooperation of all parties in coming to an agreement to secure the future of Air NZ.

"The recapitalisation agreement contains arrangements that will enable Air NZ to start a process of recovery from the severe setbacks it has suffered on several fronts," Dr Farmer said.

Finance Minister Michael Cullen said $300 million would be made available to Air New Zealand as soon as possible.

"This will be made in the form of a loan in the first instance for legal reasons and because that is the way the money can be released soonest. Subject to shareholder approval and other conditions, the amount will later be repaid and replaced by convertible preference shares. The share price paid for these shares will be up to 24c," Dr Cullen said.

The second tranche -- for up to $585 million -- will be taken out as ordinary shares. The price will be determined after due diligence at a value "fair to both the taxpayer and Air New Zealand shareholders".

The Government will end up with an 83 per cent stake in the airline.

Air NZ said no further capital was sought from major shareholder Brierley Investments and Singapore Airlines, who will retain their current shareholdings (30 per cent and 25 per cent respectively) until at least January 31, when the recapitalisation is expected to have been completed.

"BIL and SIA have agreed to support the transactions contained in the agreement and to vote in favour of the shareholder resolutions to put it in place.

"They will retain their current shareholdings until at least 31 January 2002, when the recapitalisation process is expected to have been completed.

"If the full amount of $885 million is invested by the Crown at 24cps, it will hold approximately 83 per cent of the enlarged share capital. If the issue price is higher the percentage will be correspondingly lower."

Under the terms of the agreement reached with Ansett's Australian administrators, Air NZ and its directors will be released from all claims relating to Ansett, which collapsed last month.

Air NZ said it has also agreed to enter into a commercial arrangement with the Ansett Group as a preferred partner and to provide intellectual property to assist the voluntary administrators to carry on the Ansett business "as long as it is not detrimental to Air NZ".

The agreement with the voluntary administrator is subject to the approval of the Federal Court of Australia and the Ansett committee of creditors, expected by October 12.

The settlement doesn't affect an investigation by the Australian Securities and Investment Commission into the adequacy of Air NZ's and Ansett's disclosure of financial information.

Any further liability for the company from Ansett is considered unlikely.

The Stock Exchange said it would review lifting the suspension of Air NZ shares later today. When trading was halted on the shares, both Air NZ A and the freely held B shares were at 40c.