Air deal's financing details clouded in mystery

By GEOFF SENESCALL

Questions remain over Air New Zealand's financing structure in the wake of last week's buy of News Corp's 50 per cent stake in Ansett Australia.

The central issue is how Air New Zealand intends dealing with foreign ownership provisions attached to its A-class shares if scrip is given to News Corp as part-settlement.

Under the deal announced on Friday, News Corp gets $A580 million ($753 million) cash as well as a top-up within two to four years of Air New Zealand shares equivalent to 10.5 per cent of the company.

Air New Zealand has the option of paying in cash instead of shares, which at yesterday's closing price would mean finding $100 million more. However, if the option of issuing shares is taken, Air New Zealand says it will issue News Corp both A and B shares.

Air New Zealand would not explain how, given that News Corp is a foreign company and cannot own the A shares. It would only say: "If News cannot hold the A shares for any reason then there are provisions in the agreement that anticipate that and take it into account."

Air New Zealand's share structure was set up to protect the airline's international landing rights.

The protocol says 51 per cent of the company must be owned by New Zealanders, which is fulfilled through the A shares.

Unless a structure could be built to house the A shares, the market will see the stake as an overhang and would discount the airline's share price.

According to airline sources, its ownership structure is unlikely to change in the foreseeable future.

The second leg to Air New Zealand's purchase is a rights issue of between $250 million and $290 million within six months.

Sir Selwyn Cushing indicated last year that Brierley Investments, the owner of 47 per cent of Air New Zealand, would take up its rights, which would mean a payout of between $118 million and $137 million.