By Rob Hosking
Wednesday 28th May 2003
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Tower said yesterday that GPG was going to pay $68 million for 50 million shares in the group at $1.35 each.
That will take its stake from just under 10% to around 30%. GPG will also underwrite a $135 million pro-rata renounceable rights issue with an exercisable price of $1 each.
It is likely GPG will pick up more of GPG through the underwriting deal.
The $200 million capital raising requires approval from shareholders and the regulators and the prompt removal of a 10% shareholder restriction that was due to expire in September.
"Some people will say they are getting them at a very good price," group managing director Keith Taylor says. "That's the business they are in. there are not many people prepared to write out a cheque for $68 million at the moment, particularly to get into the life insurance business."
Besides the capital raising Tower confirmed further asset writedowns, and a half yearly loss of $154.4 million.
Chairman Olaf O'Duill said he hoped this latest result was the last of the writedowns but there could be no guarantee of that.
"We think we have taken a pretty severe haircut. But people's view of the market, and people's perceptions of what is valuable, changes over time. We are not in control of that. But we think we have taken a prudent, conservative view."
The writedowns, and the continued losses, mean Tower's net asset backing is now $3.20, compare to $5.13 a year ago.
The net impact of the 'one off' items for the half year to March is $162 million.
The biggest single item in this is the $134.4 million reduction in carrying value of the companies in the group, due to changed accounting treatment.
The Bridges subsidiary accounted for $26.4 million of the writedowns over the half yearly period. The remainder are mostly to do with restructuring costs, both past and going forward.
While the Australian Prudential Regulation Authority has earlier required Tower to inject $30 million into the reserves, there was no regulatory impetus behind this latest move, O'Duill says.
The move was rather driven by the need to reduce Tower's debt more quickly than it otherwise might, in a bid to restore confidence not only in investors but also in customers, he says.
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