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Re: [sharechat] BIL Capital Notes. Accept ? No Way!

From: "" <>
Date: Mon, 18 Oct 1999 11:54:44 +0000

> The following from NZ Herald 16/10/99
> But the anxiety is overdone. 
> First, as a listed company, it discloses much more financial information.
The disclosure requirements for a company listed in Bermuda are the
same as the disclosure requirements for a company listed in NZ?
> Second, 70 per cent of its assets are shares in listed companies which also
> disclose data - and the shares would be easy to sell if Brierley had to
> raise cash.
If Brierley had to raise cash that cash would be used to pay off the 
banks.   The convertible notehloders would get nothing. 
> Third, if Brierley ran into problems it would have a cushion of $1.3
> billion of equity capital before investors in its subordinated debt were
> affected.
If Brierley ran into problems they would postpone payment of interest 
to convertible note holders.   There is a clause in the convertible 
note prospectus which says that non payment of interest does not 
constitute a default (!).  People who think they are getting a 
'secure income flow' are mistaken.
> Fourth, Brierley has a stable BBB debt rating, the same as Fletcher
> Challenge and higher than Fernz Corporation which has a similar debt
> instrument in the market.
Stable debt rating?   There is no such thing.  The reason they have a 
rating at all is that these ratings are subject to going up and down 
depending on the current debt equity position, and future prospects. 
Surely the author isn't suggesting that a corporate monolith 
based in Bermuda with no visible strategy is only as risky as 
Fletcher Challenge or Fernz?   
> So barring an unforeseen catastrophe, Brierley is offering a relatively
> secure bet with its $300 million capital note issue. Under the issue,
> shareholders exchange their shares for the four-year notes. When the notes
> mature, investors will receive per note, at the company's discretion,
> either 55c cash or 55c worth of shares.
So if the company does well the share price will improve towards 
the net asset backing, between 70 and 90 cents and the noteholders 
will miss out  on a 25 to 45 cent rise in the share price.   And if 
it does badly the company will pay the noteholders out in 
poorly performing shares.   Which is what the noteholders wanted 
out of in the first place!    The only thing 'secure' about this 
offer is that the noteholder will be worse off than the shareholder 
whatever happens.
> Investors who hold on to their shares might also receive income if Brierley
> resumes paying dividends. A 3c a share payment has already been earmarked
> for this year. Brierley's major shareholder, Camerlin Group, sent a strong
> message at last year's annual meeting that it was keen to see dividends
> flow again.
Dividends are flowing again.   Brierley has the continuing 
core earnings to allow this to continue at up to 6c per share and 
Camerlin will ensure that the highest dividend that can be paid will 
be paid.

At a 55c nominal value I can't see any merit in accepting the 
convertible note offer. SNOOPY
Message sent by Snoopy 
on Pegasus Mail version 2.55
"You can tell me I'm wrong twice, 
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