WAV/RULE: AIA: Application for waivers

2 Feb 2010 9:19 am

AIA 02/02/2010 WAV/RULE

REL: 0919 HRS Auckland International Airport Limited

WAV/RULE: AIA: Application for waivers

January 26, 2010

NZX Regulation Decision Auckland International Airport Limited Application for waivers from Listing Rules 7.3.1, 7.10.1, 7.10.2, 7.10.10 and 5.4.1 Background 1. Auckland International Airport Limited ("AIA") is listed on the NZSX and ASX markets.

2. On 13 January 2010, AIA announced it had purchased a 24.55% stake in Cairns and Mackay airports in Queensland, Australia for A$132.8m (approximately NZ $166m) (the "Acquisition").

3. AIA intends to undertake an Accelerated Renounceable Entitlement Offer ("AREO" or the "Offer") of up to $130 million to repay part of the debt used to fund the Acquisition. The Offer will be fully underwritten by Credit Suisse (Australia) Limited and First NZ Capital Securities Limited ("the Underwriters").

4. The AREO structure is intended to be functionally equivalent to a pro-rata entitlement offer of shares in AIA ("New Shares") to existing shareholders in AIA. However, the AREO is conducted in two parts, with an accelerated entitlement offer to institutional shareholders followed by an entitlement offer to retail shareholders. The entitlement price will be the same under both entitlement offers ("Entitlement Price"). In addition, entitlements not, or not able to be, taken up by existing shareholders under the offers will be sold on behalf of those shareholders in two bookbuilds. Entitlements not able to be taken up are those in respect of certain overseas jurisdictions.

5. The offers are therefore not "renounceable" in the traditional sense, but achieve an equivalent result, with shareholders who do not, or are not able to, take up their entitlements receiving the benefit of any excess of price achieved for the entitlements in the relevant bookbuild above the Entitlement Price.

6. The Offer will be undertaken in the following stages: (a) Institutional Entitlement Offer: The first stage is a pro-rata offer of New Shares at a fixed price to institutional shareholders in predetermined eligible jurisdictions ("Eligible Institutional Shareholders"). The Institutional Entitlement Offer would commence at the same time as the Offer is announced, and would be open for two Business Days. A trading halt on AIA shares will be put in place from the time of the announcement of the Offer until the close of trading on the Record Date, being the Business Day after the institutional bookbuild (see waiver application number 5 below, for further discussion on this point).

(b) Institutional Bookbuild: New Shares in respect of entitlements not taken up by Eligible Institutional Shareholders, along with New Shares in respect of entitlements that would have been offered to any ineligible overseas institutional shareholders had they been entitled to participate in the Institutional Entitlement Offer, will be offered under a bookbuild to a broad audience of institutional investors ("Institutional Bookbuild"). Eligible Institutional Shareholders may participate in the Institutional Bookbuild in order to obtain more than their pro-rata entitlement. Institutional shareholders that do not, or are not eligible to, take up their entitlement would receive any excess of the bookbuild price above the Entitlement Price. The price paid by investors under the Institutional Bookbuild would not be lower than the Entitlement Price. The Institutional Bookbuild would take place over the course of the Business Day following the close of the Institutional Entitlement Offer.

(c) Retail Entitlement Offer: Following completion of the Institutional Bookbuild, a pro-rata offer of New Shares ("Retail Entitlement Offer") would be made at the same price and ratio as the Institutional Entitlement Offer to existing shareholders in New Zealand and Australia who did not receive an offer under the Institutional Entitlement Offer ("Eligible Retail Shareholders").

The Retail Entitlement Offer will be open for a period of 13 Business Days.

(d) Retail Bookbuild: New Shares in respect of entitlements not taken up by Eligible Retail Shareholders, along with New Shares in respect of entitlements that would have been offered to ineligible overseas retail shareholders if they had been entitled to participate in the Retail Entitlement Offer, would be offered under a bookbuild to institutional investors ("Retail Bookbuild"). Retail shareholders that do not, or are not eligible to, take up their entitlement would receive any excess of the bookbuild price above the Entitlement Price. The price paid by investors under the Retail Bookbuild would not be lower than the Entitlement Price. The Retail Bookbuild would take place two Business Days after the close of the Retail Entitlement Offer.

7. The AREO structure gives rise to a number of waivers from the NZSX Listing Rules ("Rules").

Application 1 - Waiver from Rule 7.3.1 8. Rule 7.3.1 prohibits the issue of Equity Securities without approval by an ordinary resolution of shareholders. However, Rule 7.3.4(a) provides an exception to this prohibition where the Equity Securities are offered on a pro-rata basis to existing shareholders and the offer is Renounceable.

9. Under the Offer, all eligible shareholders would be offered New Shares on a basis that would (if accepted by all shareholders) maintain the existing proportionate rights of each shareholder to votes and distributions. However, New Shares in respect of entitlements that are not taken up, or not able to be taken up, by shareholders will be offered through the Institutional Bookbuild and the Retail Bookbuild.

Entitlements would not be able to be traded or sold privately by shareholders. The Institutional Bookbuild and Retail Bookbuild effectively replace entitlements trading and provide an opportunity for shareholders that do not, or are not eligible to, take up their entitlements to receive value for them. This does not fit within the definition of "Renounceable" in the Rules, as the entitlements are not transferable by the holder to another person (i.e. the securities cannot be traded on NZSX or another exchange nor can they be traded privately), but instead are sold on behalf of the holder by the Underwriters.

10. Accordingly, the Offer cannot be made under Rule 7.3.4(a) and a waiver from the general prohibition in Rule 7.3.1 is required. In support of its application, AIA submits that: (a) Although the Offer is not "Renounceable" as defined in the Rules, shareholders who do not, or are not eligible, to take up their entitlements will benefit from any excess in price received in the bookbuilds over the Entitlement Price as if the entitlements were "Renounceable" and will not incur any brokerage in doing so. This includes a shareholder who simply takes no action in respect of their entitlement.

(b) The key policy reason behind requiring any rights issue to be renounceable is that shareholders in AIA should not be compelled to participate in the Offer in order to share in any "bonus element" of a rights issue. However, through the dual bookbuilds, shareholders that do not, or are not eligible to, participate in the Offer will receive any "bonus element" that the market ascribes to their Entitlements.

(c) Another policy reason for excluding non-renounceable issues from Rule 7.3.4(a) is to avoid the possibility that a non-renounceable issue was used as an opportunity for parties with a controlling interest in the issuer to increase their proportionate holdings at the expense of parties who are unable or unwilling to participate in the offer. As AIA is a widely held company and the proposed capital raising is relatively small, there is no opportunity for controlling parties to increase their proportionate holdings to the detriment of shareholders who do not participate in the offer.

(d) Making the Offer subject to shareholder approval would be detrimental to the Offer for the following reasons: (i) The time period for completion of the Offer would be extended which would expose AIA's share price to increased risk of variation during the period of the Offer.

(ii) Announcing the Offer as conditional on shareholder approval would also exacerbate volatility, especially in the lead up to shareholder approval, and likely put downward pressure on AIA's share price which would add to the challenges of executing a successful capital raising.

(iii) Extending the risk period for potential underwriters to allow for a shareholders' meeting would reduce the likelihood of being able to underwrite the Offer.

(e) AIA does not believe an AREO structure has been used before in New Zealand, however it is aware of the following examples of waivers from Rule 7.3.1 in respect of non-renounceable entitlement offers where the institutional component has been accelerated ahead of the retail component: (i) In 2002 Powerco was granted a waiver from NZSE from obtaining shareholder approval for a non-renounceable "Jumbo" offer with an accelerated institutional component on the basis that: 1. extending the time period for the offer would result in increased distortion to Powerco's share price during the offer period; 2. Powerco's underwriters were reluctant to underwrite such a large share offer which was contingent on shareholder approval; and 3. in Powerco's opinion, existing shareholders were not prejudiced by the structure of the offer.

(ii) In 2005 and 2007 Macquarie Goodman Property Trust and Goodman Property Trust were granted waivers from the requirement to seek shareholder approval for non- renounceable offers with accelerated institutional components. However, in granting these waivers NZXR relied on the fact that unitholders would be voting to decide whether to approve the acquisitions with which the offers were connected. Therefore, unitholders would effectively be able to vote against the entitlement offer proceeding by voting against the acquisition.

Rules 11. Rule 7.3.1 states: No Issuer shall issue any Equity Securities (including issue on Conversion of any other Security) unless: (a) the precise terms and conditions of the specific proposal to issue those Equity Securities have been approved (subject to Rule 7.3.3) by separate resolutions (passed by a simple majority of Votes) of holders of each Class of Quoted Equity Securities of the Issuer whose rights or entitlements could be affected by that issue, and that issue is completed within the time specified in Rule 7.3.2; or (b) the issue is made in accordance with any of Rules 7.3.4 to 7.3.11.

12. Rule 7.3.4 states: A Issuer may issue Equity Securities if: (a) those Equity Securities are offered to holders of existing Equity Securities of the Issuer on a basis which, if the offer were accepted by all such holders, would maintain the existing proportionate rights of each existing holder (relative to other holders of Equity Securities) to Votes and to Distribution Rights, and that offer is Renounceable.

13. Rule 1.6.1 contains the definition of Renounceable: Renounceable: In relation to a Right or offer of Securities means a Right or offer that is transferable by any holder for the time being to another person (whether or not an existing holder of any Securities to which the Right or offer relates).

Decision 1 - Waiver from Rule 7.3.1 14. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants AIA a waiver from the requirement in Rule 7.3.1 to seek shareholder approval of the Offer.

Reasons 15. In coming to its decision to grant AIA a waiver from the requirement in Rule 7.3.1 to seek shareholder approval of the Offer, NZXR considered the following matters: (a) The Offer will be entirely pro-rata, except where new shares will not be offered to shareholders in jurisdictions that the Offer is not extended to, which is consistent with Rule 7.3.4(h) for offers conducted in accordance with Rule 7.3.4(a). The only criteria of Rule 7.3.4(a) that is not fulfilled is the requirement for the Offer to be renounceable, as discussed above.

(b) The purpose of requiring pro-rata offers to be renounceable is to ensure that shareholders who are unable to take up their entitlement, and will accordingly suffer dilution, still receive a benefit from the entitlement in the form of the proceeds received from the sale of their entitlement.

(c) The Offer will provide a return to shareholders who do not exercise their entitlement in the form of any premium reached in the Institutional and Retail Bookbuilds in excess of the Entitlement Price. Accordingly, the Offer, whilst not being strictly renounceable in accordance with the definition in the Rules, does fulfill the purpose of the requirement for an offer to be renounceable.

(d) Accordingly, NZXR is satisfied that the purpose of Rule 7.3.1 will not be impugned by the granting of this waiver.

Application 2 - Waiver from Rule 7.10.1 16. Rule 7.10.1 requires letters of entitlement to be mailed to shareholders within five Business days of the Record Date.

17. Under the AREO structure, the Record Date for the Institutional Entitlement Offer is two Business Days after the Institutional Entitlement Offer closes. AIA accordingly seeks a waiver from Rule 7.10.1 to enable institutional shareholders to be notified of their entitlement prior to the Record Date and to enable that notification to occur by means other than physical letters of entitlement. In support of its application, AIA submits that: (a) Rule 7.10.1 envisages that the Issuer does not know the identity of entitled shareholders prior to the Record Date. However, due to the proposed structure of the Offer, AIA will need to calculate the entitlements of its institutional shareholders prior to the Record Date and inform the Eligible Institutional Shareholders of their entitlement in time for them to participate in the Institutional Entitlement Offer; (b) To acheive the above Orient Capital will provide daily register breakdowns of AIA's beneficial shareholders in the days leading up to and including the announcement date. Following announcement of the Offer, the Joint Lead Managers will approach those of AIA's shareholders who are institutional clients of Credit Suisse or First NZ Capital, together with shareholders that they reasonably believe to be Eligible Institutional Shareholders.

(c) NZXR has granted similar waivers to: (i) Goodman Property Trust on 8 November 2007; (ii) Macquarie Goodman Property Trust on 4 March 2005; and (iii) Powerco on 3 September 2002.

(d) In its decision in respect of Goodman Property Trust's application for waivers, dated 7 November 2007, NZXR stated that: NZXR believes that the policy of Rule 7.10.1 is to ensure that entitlements are calculated and notified within a reasonable time after the record date. NZXR does not believe that the intention of the rule is to preclude notification of entitlements prior to the retail record date where they are known.

(e) In addition, physical letters of entitlement will not be sent to institutional shareholders due to the time constraints imposed by the accelerated institutional offer period. Instead, AIA will notify institutional shareholders of their entitlement by whichever means will ensure that those institutional shareholders obtain that information in as timely manner as possible to ensure that they have the maximum amount of time in which to consider the Institutional Entitlement Offer.

Rule 7.10.1 18. Rule 7.10.1 states: Letters of entitlement to Rights (whether or not Renounceable) are to be mailed to holders of the Rights within five Business Days of the Record Date for the determination of the entitlement and by means that will give the holders reasonable time to deal with their Rights, whether the holders' addresses are in New Zealand or elsewhere.

Decision 19. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants AIA a waiver from Rule 7.10.1 to enable Eligible Institutional Shareholders to be notified of their entitlement prior to the Record Date and to enable that notification to occur by means other than physical letters of entitlement.

Reasons 20. In coming to the decision to grant AIA a waiver from Rule 7.10.1, NZXR considered that: (a) The policy behind Rule 7.10.1 is to ensure that letters of entitlements are sent as soon as possible after the Record Date for an entitlement. This ensures that shareholders have as much time as possible to consider how to deal with their entitlement.

(b) This waiver is only granted in respect of Eligible Institutional Shareholders. It is a necessary function of the AREO that such shareholders are approached before the Record Date of the Offer. Without this waiver the Offer could not proceed.

(c) With regards to all other shareholders, AIA will be required to comply with Rule 7.10.1.

(d) Accordingly, NZXR is satisfied that the policy behind Rule 7.10.1 will not be impugned by the granting of this waiver.

Application 3 - Waiver from Rule 7.10.2 21. Rule 7.10.2 requires a Rights issue to be open for at least 12 Business Days from the day the last letter of entitlement is mailed.

22. According to the proposed Offer timetable, the prospectus for the Offer will be provided to Eligible Institutional Shareholders on the day on which the Institutional Entitlement Offer is announced and opens, with those institutions then having the rest of that day and part of the following day to consider the Offer.

23. AIA accordingly seeks a waiver from Rule 7.10.2 to the extent that it would require the Institutional Entitlement Offer to remain open for 12 Business Days. In support of its application, AIA submits that: (a) it is important that upfront commitments are received from Eligible Institutional Shareholders to ensure that any shortfall from the Institutional Entitlement Offer is able to be placed as advantageously as possible. This will help ensure that those Eligible Institutional Shareholders not participating in the Offer have the best possible chance of receiving a premium for their entitlements from the Institutional Bookbuild.

(b) AIA considers that Eligible Institutional Shareholders in AIA are unlikely to be prejudiced as a result of the shortened offer period for the following reasons: (i) The Institutional Entitlement Offer would be offered to institutional shareholders in AIA who are accustomed to considering offers and making investment decisions at short notice.

(ii) The proposed timetable is consistent with market practice for offers to such investors (i.e. the various institutional placements undertaken earlier in the year, e.g. Fletcher Building, Skycity, Freightways, Kiwi Income Property Trust).

(iii) The announcement and prospectus for the Offer will clearly state that a shorter than usual offer period will be available to institutional shareholders under the Institutional Entitlement Offer.

(c) NZXR granted similar waivers in respect of the institutional component for rights issues referred to in paragraph 17(c) above.

Rule 7.10.2 24. Rule 7.10.2 states: Without limiting Rule 7.10.1, the closing date and time for applications under Rights issues (whether or not renounceable) shall not be earlier than the 12th Business Day after the day of mailing of the last of the letters of entitlement.

Decision - Waiver from Rule 7.10.2 25. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants AIA a waiver from Rule 7.10.2 to the extent that it would otherwise require the Institutional Entitlement Offer to remain open for 12 Business Days.

Reasons 26. In coming to the decision to grant AIA a waiver from Rule 7.10.2, NZXR considered the following matters: (a) The policy behind Rule 7.10.2 is to ensure that shareholders have sufficient time to consider, and act on, an entitlement offer.

(b) The waiver only applies in respect of Eligible Institutional Shareholders. NZXR accepts AIA's submission that such shareholders are accustomed to considering offers and making investment decisions at short notice. NZXR also accepts AIA's submission contained in paragraph 23(b)(ii), and notes that such a timetable would be premissable for a placement conducted under Rule 7.3.5, which the Institutional Entitlement Offer is similar to.

(c) The Retail Entitlement Offer will be open for the full 12 Business Day period as required by Rule 7.10.2.

(d) Accordingly, NZXR is satisfied that the policy behind Rule 7.10.2 will not be impugned by granting this waiver.

Application 4 - Rules 7.10.10 27. Rule 7.10.10 requires that AIA provide NZX with full details of the Offer at least 5 Business Days before the Record Date of the Offer.

28. The AREO structure provides for the Offer to be announced to the market at the same time as the Institutional Entitlement Offer opens and shares in AIA are put into trading halt. This is the standard timeframe for AREO transactions with which institutional investors in New Zealand and overseas are very familiar.

29. AIA notes that NZX granted waivers from this requirement to: (a) Goodman Property Trust on 8 November 2007; (b) Macquarie Goodman Property Trust on 4 March 2005; and (c) Powerco on 3 September 2002.

30. Accordingly, AIA has requested a waiver from Rule 7.10.10 to the extent that it would require notification of the Offer five Business Days prior to the Record Date.

Rule 7.10.10 31. Rule 7.10.10 states: Where a Rights issue is to be made but Quotation is not sought the Issuer shall give to NZX forthwith after the decision has been made and at least 5 Business Days before the Record Date to determine entitlements, on the form in appendix 7, full details of the issue, including the nature, entitlement and timing of the issue of Rights and conversion, pricing, amounts payable and ranking of Securities for future benefits.

Decision 32. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants AIA a waiver from Rule 7.10.10 to the extent that the Rule would require notification of the Offer five Business Days prior to the Record Date.

Reasons 33. In coming to its decision to grant AIA a waiver from Rule 7.10.10, NZXR considered the following matters: (a) The policy behind Rule 7.10.10 is to provide shareholders and stakeholders within the market sufficient notice of an upcoming entitlement. It also provides an opportunity for investors to trade in or out of stock.

(b) NZXR has been advised that from an operation level, with particular regard to AIA's registry, the shortened notification period of the Record Date does not cause any issues.

(c) As noted above, it is a feature of an AREO offer that an Issuer does not provide 5 Business Days prior notification of the Record Date.

(e) Without waiving this Rule AIA would be unable to undertake an AREO.

(f) Accordingly, NZXR is satisfied that in the present circumstances the policy behind Rule 7.10.10 will not be overly impugned by the granting of this waiver.

Application 5 - Rule 5.4.1 34. As noted above, AIA is listed on ASX as well as the NZSX market.

35. ASX has requested that the Record Date for the Offer occur on the fourth Business Day from, and including, the day trading is halted. This is to provide 3 clear trading days from the day before the trading halt to the Record Date to allow for all trades executed before the trading halt was put in place to settle before the Record Date, as ASX settlement rules state that trades must settle on T+3. This timing is customary for AREO offers undertaken in Australia.

36. However, on the NZSX it is possible for trades to settle on the same day that they are executed.

Therefore, AIA considers that trading must also be halted on the day of the Record Date to ensure that AIA can gain an accurate indication of the register as at the Record Date for the purposes of the Institutional Entitlement Offer. Accordingly, AIA has requested a trading halt from 27 January 2009 until 1 February 2009, a period of four Business Days.

37. Rule 5.4.1 states that an issuer may only apply for a trading halt for a period not exceeding two Business Days. Accordingly, AIA has requested a waiver from Rule 5.4.1 to enable AIA to request the trading halt referred to above.

Rule 38. Rule 5.4.1 states An Issuer may request: (a) by notice in writing to NZX, that trading in its Securities be halted by NZX for a period not to exceed two Business Days; or ...

Decision 39. On the basis of the information provided, NZXR grants AIA a waiver from Rule 5.4.1 to the extent that the Rule would otherwise preclude AIA from being able to apply for a trading halt for four Business Days, as discussed in paragraphs 35 to 37 above.

Reasons 40. In coming to its decision to grant AIA a waiver from Rule 5.4.1, NZXR considered the following matters: (a) NZXR accepts that it is a necessary function of AREO style offers that they are announced simultaneously with trading being halted and the institutional component of the offer commencing. It is also necessary for trading to be halted whilst the institutional bookbuild occurs.

(b) In order to ensure that the register on the Record Date accurately reflects all trades executed on the day prior to the announcement of the offer, ASX requires the Record Date to be on the fourth day after the offer is announced. This ensures that on the Record Date AIA's register will reflect the settlement of all trades executed on the day prior to the Record Date. For an issuer only listed on ASX, trading would normally also recommence on this day. No trades executed on this day would settle because of ASX's settlement rule which states that trades must settle on a T+3 basis.

(c) However, on the NZSX it is possible for trades to settle on the same day that they are executed.

Accordingly, if trading were allowed to recommence on 1 February 2009, shareholders who are Eligible Institutional Investors could trade and settle AIA shares on this day and the register on the Record Date would not align with shareholdings used as the basis of the Institutional Entitlement Offer. AIA may have a register on the Record Date which is different for the Retail Entitlement Offer than that used for the Institutional Entitlement Offer. NZXR notes that the holdings and entitlements of Eligible Institutional Investors will be reconciled between the Record Date and settlement date of the Institutional Entitlement Offer. Accordingly, if an Eligible Institutional Investor's holding differs on the Record Date from that disclosed for their allocation in the Offer, the number of New Shares allotted and money received will be adjusted. This feature of an AREO includes an element of risk on the part of AIA in ensuring that institutions correctly disclose their holdings. Enabling trading on 1 February 2009 exacerbates the risk that such disclosures may be incorrect.

(d) Accordingly, taking into consideration AIA's submission that an AREO structure is in the best interests of all shareholders, NZXR is satisfied that a four day trading halt is necessary to facilitate the Offer, and as such that a waiver from Rule 5.4.1 is appropriate.

Confidentiality 41. AIA has requested these applications remain confidential until the Offer is announced to market. NZXR grants this request as it fits within the policy contained in footnote 1 to Rule 1.11.2.

ENDS End CA:00190766 For:AIA Type:WAV/RULE Time:2010-02-02:09:19:47

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