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Dorchester Confirms 30 June 2010 for Investor and Shareholder Meetings 

 

14 June 2010

 

Dorchester Pacific has confirmed 30 June 2010 as the date for Investor and Shareholder Meetings to approve the Capital Reconstruction Plan (CRP) and related $10 million Capital Raising.  

On 30 June, three meetings will be held in Auckland at the Ellerslie Event Centre: 

 

10.00 am          Meeting of Debenture Stockholders to vote on the CRP
11.30 am         Meeting of Subordinated Noteholders to vote on the CRP
12.00 pm        Special meeting of Shareholders in Dorchester Pacific to consider and vote on resolutions on the CRP, the Capital Raising and the related underwriting agreements with The Business Bakery and Hugh Green Investments.

 

A number of Investor and Shareholder Roadshows will be held around the country ahead of the 30 June 2010 meetings.   A schedule of the dates and venues for these meetings is available here.

 

1.         Capital Reconstruction Plan Documentation for Debenture Stockholders and Noteholders

 

Dorchester Pacific advises that information on the Capital Reconstruction Plan has now been mailed out to Debentureholders and Noteholders.

 

The documentation includes the Offer Document (incorporating an Investment Statement), a Simplified Disclosure Prospectus, an Independent Appraisal Report on the CRP from PricewaterhouseCoopers (PwC) and letters from the respective trustees (Perpetual Trust for the Debenture Stockholders or New Zealand Permanent Trustees for the Noteholders).

 

As announced earlier, the proposed settlement with Debenture Stockholders under the CRP involves the issue of 4 new securities in return for their 50 cents in the dollar of outstanding Debenture Stock not already repaid.   The four securities are;

 

  • Units in a property unit trust holding 4 hotel properties with an aggregate $33 million value
  • 3 year, secured, interest bearing Notes, $20 million in aggregate
  • 36.6 million Shares in Dorchester Pacific (representing 50% of shares on issue pre Capital Raising
  • Options to acquire further Shares

Subordinated Noteholders who have been repaid 10 cents in the dollar will have the option;

  • to sell their Subordinated Notes for an additional 15 cents in the dollar,     or
  • to exchange their Subordinated Notes for new shares in Dorchester Pacific at the rate of 2.3 shares for each $1 
    original principal (a nominal value of 23 cents for each $1 of Subordinated Note on the basis that new shares are 
    being issued at 10 cents each),    or
  • to do a combination of the above 2 options

 

In their Independent Appraisal Report, PricewaterhouseCoopers conclude:

 

“Subject to the Matters for Consideration raised by us, we believe that the proposal has merit and should be put to Investors.   Provided certain key success factors materialise (including favourable market conditions and the achievement of Group operating forecasts) [Debenture] Stockholders could potentially recover a significant portion or possibly all of their original investment”,         and

 

“The CRP offers Noteholders an immediate payment of 15 cents in the dollar and is the only scenario in which Noteholders are likely to receive any further returns.   Noteholders can also elect to receive shares in lieu of the 15 cent payment”.

 

In a covering letter to Investors accompanying the documentation, Directors state that they believe that the Capital Reconstruction Plan will provide a materially better outcome than the alternatives of receivership or liquidation against which the Capital Reconstruction Plan needs to be considered by Investors.

 

Executive Director Paul Byrnes commented:   “We appreciate we are in the hands of our Investors for their support and approval of the Capital Reconstruction Plan.   We also appreciate that outcomes from other finance companies that have been in moratorium have generally been very disappointing.   In fact, most of the arrangements have failed to deliver.

 

However, there are some quite significant points of differentiation in Dorchester’s case, for instance;

  • if approved the CRP will take Dorchester out of Moratorium
  • Dorchester has already repaid Debenture Stockholders 50 cents in the dollar
  • there has been full transparency and no related party lending
  • not less than $8 million in new capital will be introduced by shareholders as a condition of the CRP
  • the $33 million hotel property positions are supported by independent valuations
  • the future business  of Dorchester is not reliant on the property market or property lending
  • there have been significant Board and management changes

We have confidence that Investors will assess the Capital Reconstruction Plan on its real merits”.

 

2.         Documentation for Special Meeting of Shareholders

The Company also advises that documentation for the special Meeting of Shareholders is being printed and mailed out today and tomorrow.

 

The documentation includes the Notice of Special Meeting which provides explanatory notes on the 4 resolutions to be considered at the meeting and a summary independent appraisal and independent adviser report prepared by Campbell MacPherson Limited on the merits of the proposed allotment of voting securities to The Business Bakery and Hugh Green Investments.

 

The 4 resolutions to be considered and, if thought fit, passed at the meeting are;

 

Special Resolution 1    - Approval of Dorchester’s Capital Reconstruction Plan
Ordinary Resolution 1   - Approval of the issue of Shares and Options under the Capital Reconstruction Plan
Ordinary Resolution 3   - Approval of Dorchester’s $10 million Capital Raising
Ordinary Resolution 4  - Approval of the underwriting agreements with The Business Bakery and Hugh Green Investments

 

All 4 resolutions to be considered must be passed in order for the Capital Reconstruction Plan and the Capital Raising to proceed.

  

In relation to the allotment of shares to The Business Bakery and Hugh Green Investments under the Capital Raising,  the summary report of Campbell MacPherson concludes:   

 

“In our opinion, after taking into account all the relevant factors, we consider that the advantages of the Capital Raising and associated Underwriting Arrangements outweigh the disadvantages to the non-associated shareholders of Dorchester Pacific.   We are also of the view that the Capital Raising and associated Underwriting Arrangements are fair to the non-associated shareholders of the Company and are in the best interests of Dorchester Pacific.”

 

Mr Byrnes commented:   “The Notice of Special Meeting includes details of the Capital Reconstruction Plan.    In addition, shareholders are welcome to attend any of the Investor Roadshows if they have any questions on the CRP or the Capital Raising”.

 

 

3.         Capital Raising Dates and Documentation

As previously advised Dorchester Pacific Limited will issue up to 100 million Shares at $0.10 cents cash per Share, with provision for oversubscriptions of an additional 10 million Shares at $0.10 cents cash per Share, payable in full upon application.

 

The Company’s shareholders will be offered 1.3678 new Shares for each Share held at the record date for the offer. 

 

The Debentureholders will be offered 1.3678 new Shares for each Share which the Debentureholders will be entitled to receive under the Capital Reconstruction Plan.

 

Shareholders and Debentureholders can apply for more than their entitlement and anyone permitted by New Zealand law can apply for any shortfall and/or the oversubscriptions.  

 

The record date is 18 June 2010.   The Capital Raising is scheduled to open on 21 June 2010 and remain open until 20 August 2010.

 

The Company will send shareholders an Acceptance Form setting out their entitlement together with a Simplified Disclosure Prospectus around the 20 June 2010.

 

 

 

ENDS