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Of Bulls & Bears

Friday 26th May 2000

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Frucor owner counts its Ls and Ms

An odd deal has been worked out with convertible notes in soon-to-list drinks company Frucor. The prospectus shows major shareholder Pacific Equity Partners, a group of Australian and US merchant banks, bought five Class L mandatory convertible notes for a total payment of $17.7 million on 25 June 1998 and six for $214,395 on September 1,1998. These pay a healthy 13.5% yield and at the time of the share float can be converted into cash or shares "equal to the face value of the notes divided by 9.5444. That means holders will receive 1.8 million shares worth $3.5-4 million (depending on the final offer price) for their $17.7 million investment. However, on the same dates as the above transactions, PEP also bought six Class M mandatory convertible notes for $750,000 and six for $9107. These also pay 13.5% interest and can convert into cash or shares "equal to the face value of the notes divided by 0.1019." That amounts to 7.4 million shares worth $14.4-16.6 million from an investment of $759,000. So PEP stands to take a huge loss on one set of notes but make a huge gain the other. All up, the group seems to come out roughly even, which raises the question of why there was such a complex arrangement in the first place.

Investors hold on to e-Opportunity

Most technology shares have been losing value for weeks and some former high flyers like Advantage Group are down 50% on their yearly highs. Only one seems to have bucked the trend, a recent arrival on the Stock Exchange's New Capital Market. With a name like e-Opportunity and with its main asset being some "innovative human-resources software," Ferdinand thought it would have been among the first to get hammered now the technology bubble has burst. However, the company's share price this week has reached a post-listing high and is around 12% above its offer price of 50c. Liquidity may play a part in this - the company has only two million shares offered and a typical parcel changing hands is only a few thousand.

Australia leads property race

Investors in New Zealand and Australia have a useful barometer of each country's property sector thanks to a series of unit trusts branded "Property Leader." Three, covering Australia, New Zealand and Australasia respectively, were launched by Guardian Trust a couple of years ago. The offer price in each case was $1. By comparing the unit prices now, one can see which part of the world has produced the better returns for investors. Australia wins hands down with a value this week of around 95c and Australasia coming in at 80c. Poor old New Zealand comes a distant third with a value of just 78c. Maybe those Queensland apartments weren't such a bad investment after all.

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