Eager sellers send Air NZ shares back to Earth

By ELLEN READ markets writer

"There they go, 30 cents they've started trading at. There are millions going through. Yeah, millions."

That is how one sharebroker described yesterday's dramatic resumption of trading in Air New Zealand shares after the announcement of the Government's rescue package.

At Air New Zealand's request, the New Zealand Stock Exchange suspended trade in the national carrier's shares last week after comments from the Prime Minister and major shareholder Brierley Investments boosted both the resident-only A shares and the freely tradeable B shares to 40c.

Judging by the response when trading resumed, shareholders and investors must have been eager to get back into it.

Both classes of share promptly dropped sharply, as expected. The As closed at 28c and the Bs at 27c.

Volumes were high. Nearly 5.5 million A shares and more than 8.6 million B shares changed hands.

But trade in the stock has yet to resume in Australia.

The ASX suspended trading on September 13. Late yesterday, spokesman Gervase Greene said no decision had been made on when trade would resume.

Transport analyst Jason Smith of Sydney-based Salomon Smith Barney questioned whether this need ever happen, noting that there would be very little liquidity in stock and minimal overseas interest.

"And I think there are going to be large question marks over whether Gary Toomey and a lot of the senior management team he brought across from Qantas will want to remain with the airline medium-term," he added.

Back in New Zealand, brokers said 24c - the price at which the Government invested as part of its rescue package - was likely to be an anchor price for the shares. (That 24c is the weighted average price at which A shares were selling on September 25 - the day the mandate for negotiations was established and negotiations began.)

The pre-suspension close of 40c was described by one broker as "a bit rich", because the company was technically in receivership and known to have financial problems.

But the bailout package was met with a generally positive reaction. One broker enthused about the fact that Brierley Investments and Air NZ's other major shareholder, Singapore Airlines, will see their holdings diluted from 30 and 25 per cent respectively to just 5.2 and 4.3 per cent.

"The thing is - which you won't get anyone to comment on - that it's bloody good that those who caused the mess, Brierley and Singapore, have been so heavily dealt with," the broker said.

Rob Mercer, research manager at Forsyth Barr, said the Government's deal was superior to the earlier suggestion.

"[This is because] you have to look at the recapitalisation being of a substantial size that puts it on its feet and that also has the right committed shareholders going forwards," he said.

The previous plan would have seen Singapore Airlines and Brierley with 80 per cent of the company.

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