NZF may have new partner in weeks

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NZF Group's potential new business partner may be signed up within two or three weeks.

Friday, February 4th 2011, 3:14PM 2 Comments

by Jenny Ruth

Chief executive Mark Thornton says he can't give an exact timetable but is hopeful matters can be concluded within that timeframe.

NZF has been working to attract much-needed fresh equity since early last year.

Thornton has been quoted as saying the potential partner had asked that all new mortgage originations be suspended while negotiations continue. He has clarified that this only applies to the company's home loan product financed by its Westpac facility.

Other parts of the company, including its half-owned Mike Pero Mortgages, continue to write home loans, he says.

Thornton also clarified what would happen to investors in its $20 million of capital notes, which are NZX listed, who don't wish to rollover their investment into new notes.

NZF, unsurprisingly, given its precarious financial position, has ruled out repaying those investors in cash when the notes mature on March 15, instead offering a new five-year note paying 6%, well below the 9.25% the notes currently earn.

But investors can also opt to have their notes converted to equity which may be the better option if investors are confident the company will be recapitalised.

Thornton says investors opting for equity will be issued shares to the face value of the notes at a discount to the market price on NZX.

"The price is calculated on the weighted average price of trading over 20 working days prior to maturity," he says.

"If that remained at 14.5 cents, the conversion price would be 95% of that, ie 13.78 cents so $100 would equate to 725 shares."

Neither the notes nor NZF shares are particularly liquid. The shares last traded at 14.5 cents on January 21 while the notes last traded on January 24 at 85 cents in the dollar.

NZF reported a $1.4 million net loss for the six months ended September when equity of just $12.8 million supported $268.8 million of total assets. Cash had dropped to $4.1million at September 30 from $15.3 million at March 31 last year.

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