Geneva Finance investors to consider share swap

Tuesday 15th March 2011 2 Comments

Investors holding Geneva Finance subordinated notes and debentures will have to decide at the end of the month whether to swap them into shares in the finance company.

Noteholders and shareholders will vote at a meeting on March 31 on the conversion of the subordinated notes into shares at 5c per share.

The meeting will also vote on whether debentureholders can convert their scheduled March 2015 debenture principal repayment into shares at the same price.

The conversion rate was a 14 percent discount on the four-month average market price of the shares.

Investors could exchange all or part of their investments above a minimum of $50. The offer was voluntary, the company said in a prospectus to investors.

Geneva Finance would acquire $4.44 million in extra equity, and a saving in interest payments of $587,000 per annum.

Up to 88.7 million new shares would be issued to noteholders, and 97.4 million new shares to debentureholders.

There were currently 80.5 million shares on issue.

Geneva said the plan would improve the company's equity position.

However, there was no guarantee about the price the new shares would receive on the market if investors sold them, as opposed to the regular returns of interest payments on the notes and debentures.

A total of 798,350 shares in Geneva had traded on the NZAX in the last four months, although there were no sales at all in January and only 10,000 shares traded in December.

If investors voted against the proposal, directors would decide whether the company would continue to trade, whether it was possible to wind it down, or whether to appoint a receiver.

An independent report advised that a no vote was likely to result in receivership.

The subordinated notes were issued by Geneva under the 2005 unsecured trust deed, and the debentures were issued in March 2010.

Geneva froze its payments in November 2007, owing $142 million to its 3000 investors who have agreed to two capital reconstructions to keep the company from receivers.

Geneva Finance shares last traded at 5c on Friday.

Investors will also vote on restructuring the business, renaming Geneva Finance as GFG Ltd, a holding company, and transferring its assets to subsidiaries. The move aimed to make clear how the business operations were performing.

NZPA

Comments from our readers

On 16 March 2011 at 11:48 am Ivan said:

It looks like Geneva is about to shaft its investors again. Where are the Govt's regulators ?

On 18 March 2011 at 1:25 pm mark said:

A no vote to this Geneva copout, noteholders have nothing to lose here. More worthless shares? NO Thanks! Lets all go down together.