Pyne Gould unveils discounted rights offer, shares soar

Pyne Gould, the investment and finance group with ambitions to become a bank, plans to raise as much as $270 million in a rights offer at a 60 per cent discount, seeking to restore a balance sheet eroded by write-downs on property loans. Its shares soared 18 per cent.

The fund raising includes a renounceable rights offer of six new shares for every one held at 40 cents apiece, to raise $237 million, the company said in a statement. The offer is fully underwritten by First NZ Capital. Pyne Gould then plans to raise $15 million to $30 million in a placement to institutions and launch a Share Purchase Plan for up to $5,000 shares per shareholder.

"The recapitalisation provides the foundation for future growth," chief executive Jeff Greenslade said.

Pyne Gould is betting on a revival in sentiment for the company once it pays down debt and emerges with a stronger balance sheet. Among companies that have been rerated after being forced to sell shares at a deep discount are Nuplex Industries and Fisher & Paykel Appliances.

Pyne Family Holdings, the largest shareholder with 10 per cent of the stock, will take up its full entitlement and sub-underwrite $27.2 million of the rights offer. Pyne family is associated with director George Kerr.

Shares of Pyne Gould soared 18 cents to $1.18 after the announcement, suggesting investors will be happier to support a company with solid core businesses such as Marac once impaired loans are taken off its books and the group's debt is reduced.

The proceeds will be used to repay $35 million of bank debt. It will also inject $35 million of new equity onto Marac's balance sheet, bolstering the unit it will use to seek a banking licence.

Pyne Gould took an impairment charge on Marac's property development loans of $59.5 million and the company has since pulled back from its enthusiasm for returns from property finance. Marac's credit rating was cut to BB+ from BBB- by Standard & Poor's, leaving the business as a 'speculative' grade investment.

As part of the changes, Marac will sell certain property loans to another unit of Pyne Gould, which is better able to maximise their value, managing them as a distressed asset fund. The sale price will be $175 million, made up of $125 million cash and a $50 million note.

The capital raising will also provide funds to speed Pyne Gould's development of its Perpetual Asset Management unit.

The shares have tumbled 70 per cent in the past 12 months, with the one-time charges pushing Pyne Gould to an annual loss of $54.4 million, from a year-earlier profit of NZ$44.8 million.

As part of the group's comeback, the board installed Greenslade as CEO and he has since been building a team that includes former banker John Duncan as head of asset management, Sean Kam as chief financial officer and Craig Stephen as chief investment officer.

Chairman Sam Maling said operational changes have also been made "to ensure that we don't repeat the mistakes of the past."Once the capital raising is complete, the directors will review the composition of the board and the directors of Marac, Maling said.

- BUSINESSWIRE