GPG still chasing big role in Tower

By PAULA OLIVER

Tower suitor Guinness Peat Group yesterday mounted a rearguard action to secure itself a big role in an alternative plan to recapitalise the ailing insurer.

GPG was understood yesterday to be fighting for a share of the underwriting action in a proposal led by First NZ Capital which has all but officially killed GPG's own recapitalisation offer.

Trading in Tower shares was halted early yesterday at the request of the company.

Its board is considering two proposals to urgently inject $200 million into Tower's balance sheet so the company can pay off debt.

Tower's board had been intending to put a GPG-led share issue and placement to its shareholders this Friday - but criticism that the deal was too sweet for GPG has led to an alternative proposal being cobbled together.

It is understood to be a pro-rata rights issue without a placement.

GPG's deal would have seen it secure a 30 per cent stake in Tower, giving it effective control.

In a statement to the stock exchange yesterday Tower requested the share trading halt to inform the market of the status of:

* Tower's existing capital raising proposal.

* An alternative capital raising proposal received by Tower.

* The special shareholders meeting.

The halt will continue until an announcement or, at the latest, the close of trading on the Australian Stock Exchange today.

Sources close to negotiations yesterday indicated that the GPG deal had been supplanted by the alternative offer.

GPG appeared to have almost accepted this, a source said, and was now attempting to gain a big slice of the new deal. The source said GPG had contacted sub-underwriters attached to the new proposal to try to win them over.

But even if it did gain a substantial amount of the underwriting, it would not go near the 30 per cent it wanted as part of its own recapitalisation deal.

Clouding the issue is a pre-emptive clause GPG has in an agreement with Tower giving it a right to underwrite any alternative offer.

Questions have been raised over the legality of the clause and whether it can be enforced without a shareholder vote.

It is understood there are differing legal opinions on the clause, which Tower's chief executive Keith Taylor last week said was effective without requiring a vote.

Tower's chairman Olaf O'Duill indicated late last week that he expected a decision and announcement on the recapitalisation from the board within 48 hours. But that timeline passed yesterday - leaving some in the market speculating that GPG and its opponents were still engaged in squabbling over the underwrite.

Tower's board is likely to want to make a recapitalisation and underwriting announcement in one go, so it may wait until the battle is over before saying anything.

In the meantime, the clock is ticking on repayments Tower must make.

It has to repay $109 million in capital notes on August 8 and a further $186 million of syndicated debt has been demanded by the banks.

The story so far

Nov 1, 2002: Tower forecasts a $30 million-$40 million loss for the year to September 30.

Feb 3: Guinness Peat Group reveals it has become Tower's biggest shareholder, with a 9.93 per cent stake.

Feb 19: Tower chairman Colin Beyer retires, making way for Melbourne-based Olaf O'Duill.

May 28: Tower and GPG reveal $200 million capital-raising plan, to effectively give GPG a 30 per cent stake.

June 19: First NZ Capital confirms it is developing a rival financing proposal for Tower.