Dorchester securities to go on NZX, Unlisted

Dorchester offers investors a mix of securities on NZX, Unlisted platform

By Paul McBeth

June 23 (BusinessWire) – Dorchester Pacific Ltd., the financier and insurer facing receivership if it can’t convince debenture holders to accept a complex asset swap, is offering securities that trade on the NZX and the Unlisted platform as part of the deal to keep the business afloat.

The troubled firm, which convinced investors to waive payments they were owed as part of a moratorium, gave more details of the new securities on offer at the Wellington meeting of its roadshow today.

The proposal includes units in a property trust that are to trade on Unlisted and will own hotels that Dorchester says are worth $33 million. Investors, who are owed $84 million, would also get 36.5 million new Dorchester shares – worth $3.1 million at today’s price of 8.6 cents, $20 million of three-year notes and options to buy more stock.

The company also plans to raise $10 million in a share issue, with $7 million underwritten by its two major stakeholders. So far, debenture holders have received 50 cents of each dollar they are owed.

Executive director Paul Byrnes told investors at the Wellington meeting that the company wanted to offer some liquidity to investors and said it may be willing to aggregate the sale of small shareholdings to reduce brokerage fees.

“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 says returns at net present value would be 33 cents in the dollar under the salvage plan, compared to 19 cents under receivership. Net present value shows the value today of money received or payments made, and the forecasts excludes funds already repaid.

Byrnes told BusinessWire 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, told investors at the meeting that the proposal was worth backing in his view. He said the shares might rise to 24 cents in four years, provided the company meets its projections.

“The shares won’t be trading at 10 cents for too long,” Johnson said.

Byrnes also said the shares could rise to 23 or 24 cents. They rose 7.5% on the NZX today.

(BusinessWire)

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