GFNZ to raise $1.5m from underwritten rights issue

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GFNZ Group, formerly Geneva Finance, is planning a one-for-four rights issue to raise $1.5 million which has been fully underwritten by 20% shareholder Federal Pacific Group.

Tuesday, July 24th 2012, 4:18PM

by Jenny Ruth

Depending on the extent of shareholder participation, the underwriting could take FedPac's stake as high as 43.2% by September 2015.

GFNZ managing director David O'Connell says the rights issue is another step on the way to make it sufficiently attractive to investors in the future.

"We need to be credible with the market to attract new funding," O'Connell says.

The FedPac underwriting is in addition, not instead of, plans for FedPac to commit $6 million in debt funding in two tranches, secured by GFNZ receiveables and with GFNZ providing a 20% equity buffer, although the timetable has slipped, he says.

The first tranche was originally planned to be in place by June 30. O'Connell says it's still being processed.

Similarly, the timing of a new prospectus to attract new debenture funding has been delayed. O'Connell agreed it was partly dependent on the FedPac debt funding being put in place.

In early June, international ratings agency Standard & Poor's placed GFNZ's credit "CCC-" credit rating on negative watch because of the uncertainty surrounding the FedPac funding.

O'Connell says the company has kept S&P informed but has been given no indication of when the ratings agency will review its rating.

GFNZ's investors are being offered one new share for every four shares they hold at 2.75 cents per share. That's the same price FedPac paid for its stake in the March placement. However, the shares are trading on NZX at 2.2 cents.

As well, for every three new shares investors buy, they will receive two options to buy futher shares at 8 cents per share three years after the issue date. If all options are exercised, that would raise a further $3 million.

Most of GFNZ's shareholders are former debenture holders who aren't natural shareholders.

O'Connell says its very hard to assess how large the take-up of the rights issue will be. While FedPac will take up its entitlement and the about a dozen shareholders who own another 30% of the company are likely to take up their entitlements, "after that, it's very difficult."

The former debenture holders have so far been repaid $127.2 million, including interest at 11%, since the November 2007 moratorium and are still owed about $40 million.

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