Hiatus built-in to Vector share sale

By CHRIS DANIELS

A partial privatisation of the publicly owned Auckland lines company Vector may not be confirmed until late next year, when a political decision will be made on converting capital bonds into shares.

Capital bonds will soon be issued to raise $350 million to buy neighbouring lines company UnitedNetworks.

However, Vector is able to borrow from banks the entire $1.5 billion for the purchase.

While details of the bond issue have not yet been published, attention will immediately focus on how much of a commitment to a float is made.

Trustees of the Auckland Electricity Community Trust, most of whom were elected on a total no-privatisation platform, may have 12 months in which to convince their electorate of the wisdom of floating 24.9 per cent of the company.

This is because the "conversion date" when the bonds become shares is next year.

Trustee Coralie van Camp said she had asked at a Vector meeting on September 11 whether the capital bonds would be offered to the public on the understanding that they would convert to shares.

It was agreed at the meeting that the bond issue prospectus would say that any conversion to shares would be made solely at the discretion of the trust.

Mrs van Camp said she was "conned" into agreeing to the deal and would now fight against any float.

The Dow Jones financial news agency reported this week that the issue of capital bonds was "designed to appeal to both retail and wholesale investors through its entitlement for investors to participate in an equity float".

The Dow Jones source said the offering would include a "step-up provision" so that if Vector did not float a minimum of 25 per cent of its equity by the end of next September the bonds' interest rate would increase by 150 basis points.