What happens to GPG's capital notes?
A key question Guinness Peat Group board has yet to answer is what it will do with its NZX listed capital notes.
Wednesday, February 16th 2011, 6:43AM
by Jenny Ruth
The announcement of its plan for an orderly sell-down of assets and repayment of capital to shareholders mentioned the capital notes only as being among "a number of actual and contingent liabilities" as issues needing to be dealt with.
GPG has two issues of capital notes outstanding, $350 million which mature in November 2012 and pay 8.3% annual interest and $76.9 million which mature in December 2013 and pay 9% in annual interest.
The NZ Shareholders' Association chairman John Hawkins wrote to GPG's new chairman Mark Johnson in late January suggesting the company should consider repaying some or all the notes early.
"It makes no sense to shareholders that the company is sitting on large cash reserves and earning very little while paying very high rates of interest to note holders," Hawkins' letter said.
GPG said it has more than 170 million British pounds (NZ$357 million) in cash and more than NZ$1.95 million in shareholders' funds at September 30 last year.
It plans to return at least 75 million British pounds (NZ$158 million) in capital to shareholders before the end of 2011, leaving plenty of financial capacity to redeem the notes, even in the absence of asset sales.
GPG can opt to repay the 2013 notes early by giving 180 days notice and would need to pay the full face value plus any unpaid interest. Repaying early the larger issue of 2012 notes would also require 180 days notice and GPG would need to pay 101.5% of face value plus any unpaid interest.
Other investors would also like GPG to address the notes issue. "I want them to look at all the potential uses of capital they've got and pick the ones that provide the most value," says Guy Elliffe, head of equities at AMP.
Hawkins' letter had also requested the company hold its AGM in New Zealand and GPG has announced it will do so in June. Previously, GPG has always held its AGM in London, even though most of its investors are New Zealand based.
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