Dorchester says Securities Commission being unhelpful

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Dorchester Finance says the Securities Commission’s tardy response to the offer documents for its restructuring are unhelpful.

Thursday, June 17th 2010, 9:49PM

Executive director Paul Byrnes told www.depositrates.co.nz the regulator struggled to articulate its concerns with Dorchester's offer document until quite late in the piece, and the board made the decision to add, what it considered, were the commission's primary issues as an appendix document.

"Our concern is, are we suffering the backlash of the Hanover-Allied proposal, which attracted a lot of criticism," he said.

Dorchester hopes to exit its deferred repayment plan in an offer to debentureholder that will take total cash repayments to 50%, give them ownership and control of Dorchester-owned hotels including the proceeds of any sale with operating returns, and offer them a three-year interest bearing note, as well as raise up to $11 million through a share issue, of which $7 million has been underwritten by its two major stakeholders.

Byrnes said the offer had gone through the two trustees, Perpetual Trust and New Zealand Permanent Trustees, as well as PricewaterhouseCoopers, all of whom declared it had merit. His biggest frustration was the five-month delay and budget blow-out of the process, which should have come in below $250,000 - money he says that could have been better spent for investors.

Dorchester modified parts of the offer during the process with the trustees and PwC, such as including the one-year underwriting agreement on the hotel operations, lifting the share issue to debenture holders to 50% and giving noteholders the option to take shares instead of cash.

Byrnes says receivership is "inevitable" if the plan is not accepted by investors as shareholder funds go negative, and it would be "irresponsible" to keep operating in that environment.

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