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Dorchester investors being offered liquidity

Dorchester Finance will give debenture holders securities that trade on both the NZX and Unlisted bourses if its plan to exit its moratorium is agreed to by investors.

Wednesday, June 23rd 2010, 8:13PM

by Paul McBeth

The company's complicated debt-swap offer to debenture holders 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 $10 million through a share issue, of which $7 million has been underwritten by its two major stakeholders.

Investors will be able to trade all four securities, with the shares, notes and options to be listed on the NZX, and the units placed on the Unlisted trading exchange. Executive director Paul Byrnes told investors at a roadshow in Wellington that the company wanted to offer some liquidity to investors, and said they will look at aggregating the sale of small shareholdings to reduce brokerage fees, though nothing had been confirmed yet.

"All four securities will be listed on some exchange and there will be the opportunity for some liquidity," Byrnes said. "The units can't be listed on the NZX, but the Unlisted market exchange is available, and they will be listed on that."

Dorchester's offer was criticised by the Securities Commission for having a "significant bias" in favour of the recapitalisation plan, and the firm today released new information about the offer at the request of the regulator. The supplementary document gives forecast returns at net present value of 33 cents under the plan and 19 cents for receivership. Net present value shows the value today of money received or payments made, and the forecasts excludes the 50 cents already repaid. The document also aggregated of the major risks facing the business.

Byrnes said the response from investors had been generally positive on their roadshow so far, and accepted it was a place for people to vent their anger and frustration at the way their investments have panned out.

"People have generally been positive, yesterday's meeting in Dunedin was really supportive," he said. "We understand that some people will be angry and frustrated, but we can't go back, we can only go forward."

Shareholder Malcolm Johnson, an investment banker who holds about 1% of Dorchester's shares, the firm's shares could get to 24 cents over the next four years if it meets its projection under its proposal to exit its deferred repayment plan. Executive director Paul Byrnes said he expects the share price to head towards 23 or 24 cents. The shares rose 7.5% to 8.6 cents in trading today.

"The shares won't be trading at 10 cents for too long," Johnson said.


Paul is a staff writer for Good Returns based in Wellington.

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