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NZF starts talks with second company, after talks with initial group on reverse listing fail

Wednesday 15th October 2014

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NZF, the listed financial services shell company blocked from liquidating by its major noteholder this year, has begun talks with a second party about a possible reverse listing after abandoning initial talks with an undisclosed group. 

The board has begun urgent due diligence with a second firm in a bid to restructure its notes and share capital to clear the way for a reverse listing on the NZX, the Auckland-based company said in a statement. NZF had previously expected to finalise a deal with another company this week, after pushing out the deadline from the end of September, but today said that proposal hadn't eventuated.

Sean Joyce, NZF independent chairman didn't give details in announcing the first proposal had been abandoned. 

The new negotiations are expected to be formalised in the next two weeks, at which time NZF will make a more detailed announcement, he said. The new company has the backing of NZF's largest noteholder, Nessock Custodians, which according to its annual report held 15.8 percent of NZF's $18 million in capital notes at June 13.

NZF's board has been looking for a company to use its shell as a reverse listing after Nessock delayed liquidation at a special meeting in August to try to find more value in the business. At that meeting, resolutions were passed to limit NZF's expenses to $50,000 a month until Sept. 30, while granting directors a further $50,000 to look at a transaction to boost NZF's value, and said it would hold another meeting in September to make a final decision. The board subsequently cancelled that meeting.

The board first suggested liquidation in April. Restructuring plans aimed at returning the company to profitability fell over when auditor RSM Prince resigned a day after NZF was forced to restate its first-half results for a second time. NZF had planned to seek an early redemption of $18 million owed to capital noteholders in cash and shares as part of the restructure that would have seen it buy a "significant enterprise", generating annual sales of more than $100 million, it said in a statement at the time.

NZF was rebuffed by all but one audit firm, owing to its failed finance company status and its inability to repay the capital notes in full, resulting in talks with the target business ending, it said.

Last year, NZF was fined $35,000 and suspended from trading on the New Zealand stock exchange after a 4 1/2 month delay in filing its annual report. At the time, NZF said it was unable to fully value its divestment of 50 percent stake of MPMH, a holding company for Mike Pero Mortgages, as it no longer had access to the financial statements.

The NZDX-listed notes, paying annual interest of 6 percent, last traded in June last year at a yield of 260 percent. NZF's shares last traded at 1 cent, valuing the firm at $1.1 million. NZX regulation suspended the notes and shares from trading in April.


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