Stock takes: Make it here, you'll make it there

ANZ National chief executive Graham Hodges' move across the Tasman to take up the deputy chief executive role for the ANZ Banking Group suggests this market is seen as the finishing school for senior Australian banking executives.

In what is surely one of the swifter moves up the banking industry ladder, Cameron Clyne was boss at BNZ for just 18 months before being appointed chief executive of National Australia Bank.

Ralph Norris had a stint as Air New Zealand supremo in between his tenure as ASB Bank chief executive and his current job as chief executive at Commonwealth Bank of Australia.

That said, Stock Takes would be surprised to see former Westpac NZ boss Ann Sherry pop up again near the top of the parent bank's management team.

She was appointed from the top job here to head the much smaller Pacific banking operation and she left the bank shortly after the move was announced for something a little more, well, cruisy - becoming chief executive of cruise ship firm Carnival Australia.

ON THE MAT - BUT NOT BEATEN
A listed carpetmaker, wrestling with a softening building market and high debt levels, Cavalier would not appear a hot ticket right now.

The company's stock was beaten down following its interim result last month when it reported a 7 per cent fall in interim profit, cut its dividend, and forecast a 30-40 per cent drop in annual profit. Curiously, the sharp fall began four days before the result was out.

Nevertheless, Morningstar analysts, despite saying things are likely to get worse for the company before they get better, reckon it's "a world-class operation" and has been over-sold.

Its shares have bounced since hitting a 10-year low of $1.15 on March 5 but closed 22c lower at $1.58 yesterday. Morningstar reckons they are trading well below where they should be and rates the company a "Buy".

CAPITAL CONFUSION
Where now for Fisher & Paykel Appliances in the wake of its signalling that discussions it was having with potential cornerstone shareholders are unlikely to yield a satisfactory deal?

Although it says an announcement on a new shareholder is not imminent, the expiry of its short-term bank facility is.

The company's options appear to be narrowing and market chatter suggests it may be forced to pursue a massively dilutionary rights issue at a deep discount to current pricing.

A bit like Nuplex, said one market watcher yesterday.

Both had borrowed money to expand in decisions that in hindsight have been poorly timed and executed.

As their debt situations worsened, the strategic response at board level appeared to have been too little too late and now shareholders were wearing the damage.

"The problem for both those businesses is when you look at them in terms of where their earnings are and the amount of debt, there's almost no equity left in there."

He thinks both situations are a bad look for both the respective boards of the companies and the local market.

Companies needed to be assured the local market was open for those needing to raise capital, he said.

While it probably was, the situation was not helped when the boards of a couple of firms came out and said things had been bad for some time, they were going to have to issue shares shortly at probably a big discount to current prices only to prevaricate and prolong the accompanying uncertainty.

"Who wants to hold their stock today when they know they can get as much tomorrow at a big discount?

"In both situations if the boards had gone early, suspended the stock and done the deal, you'd be in a different situation."

Fisher & Paykel Appliances shares closed at 39c yesterday, sinking below the multi-year low of 42c reached on Wednesday.

Stock Takes' sources suggested any rights issue the company undertook was likely to be priced below this level.

IRD v BNZ
The first of the so-called "structured finance" transactions that the Inland Revenue says cost it more than $1 billion in tax revenue from the major banks hit the High Court at Wellington this week.

BNZ is the first of the four major banks to square off in court against the IRD over revised tax assessments totalling well over $1 billion stemming from their use of the deals between 1999 and 2004 under which they borrowed money from their parent and claimed an interest deduction, as a result producing little or no taxable income in New Zealand.

Three years ago the Business Herald reported that interest on the contested sums had taken the banks' contingent liability to over $2 billion.

In its last General Disclosure Statement, BNZ said its contingent liability with regard to the deals was $416 million plus $222 million in net interest.

The BNZ hearing is expected to last 10 weeks and will without doubt delve into mind-numbing detail of these complex transactions.

Whoever loses the first round, whether it's the BNZ or IRD, is very likely to appeal, given the sums at stake. The legislation which facilitated the banks' use of these transactions was amended in 2005 and the mechanism has not been used since.

RAKON GOES BALLISTIC
Scarcely a couple of weeks after Stock Takes noted Rakon's plunging share price, the former market darling has gone ballistic again.

The speed of its rise prompted a "please explain" request from NZX but Rakon said it had no idea why it was being so favoured by the market, to the tune of 35c, or 54 per cent, in just one day.

Since then it has kept on going, having now gained more than 100 per cent since hitting a low of 63c early this month. Rakon shares closed 1c lower yesterday at $1.27.

BARE MARKET
"We're as mad as hell and we're not going to take it any more" is the message from entertainers to the finance industry.

Hard on the heels of comedian Jon Stewart's evisceration of former hedge fund manager and TV stock picker Jim Cramer last week on his Daily Show on Comedy Central, Sicilian-born porn actress Laura Perego climbed on to a table at the Milan Stock Exchange this week clad only in her panties and with the Italian flag painted on her body and shouted: "Italy is down to its underpants."

Plenty of New Zealand investors would probably sympathise, having lost their shirts at the very least in recent months.