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Dorchester Pacific raises $11M in convertible notes, offers to buy back NZDX-listed debt

Tuesday 22nd November 2011

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Dorchester Pacific, which avoided failure last year by convincing investors to accept a debt-for-equity swap, has raised $11 million in a sale of convertible notes and is offering to buy back $4 million of NZDX-listed debt at 70 cents in the dollar.

The issue and buyback are part of the company’s capital reconstruction plan, under which its debenture holders agreed to swap their investment for a suite of securities including units in a property trust, that trade on the Unlisted platform, new notes and options.

Dorchester had aimed to raise as much as $12 million selling notes that convert to ordinary shares at 10 cents apiece. It is offering to buy its June 2013 notes, which pay 5 percent interest and trade on the NZDX market, by Dec. 16 with no brokerage fees.

“While we acknowledge the support from investors as we have rebuilt the business, we recognise that there is a body of investors who would prefer a ‘cash in hand’ option now,” chief executive Paul Byrnes said in a statement.

The NZDX-listed notes, which have a face value of $1, were quoted at $72.942 per $100 face amount on the NZX website. The yield was given as 27 percent.

Details of the capital changes were announced with Dorchester’s first-half results. Sales fell 10 percent to $4.3 million in the six months ended Sept. 30. It made a net loss of $993,000 compared to a profit of $15.7 million a year earlier, when it recognised fair value adjustments from its capital raising and reconstruction of $20.8 million.

The company has traded ahead of forecast though “both lending and insurance markets have been quieter than we had hoped, particularly in recent months,” Byrnes said.

The firm’s Dorchester Life business “has become complex for its overall scale” with new regulation likely to add “considerable costs to the operation of the business in its present form,” he said.

As a result, the company has started a review of its insurance and savings business strategy, he said.

Most of the funds from the convertible note sale came from major shareholders Hugh Green Investments, the Business Bakery and Paul Byrnes, who underwrote $10 million of the issue.

The Dorchester Property Trust units last traded on the Unlisted platform at 33 cents on Nov. 16.

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