Stock takes: Code of silence

Three years after first looking at the issue, the sharemarket's enforcement arm has finally pinged failed vending machine company VTL for a breach of listing rules dealing with related party transactions.

VTL's board in 2006 voted to provide a letter of credit in favour of CapitalSource Finance, which was lending money to All Seasons, a company in which VTL held notes that if converted would have given it 66 per cent of All Seasons stock.

VTL director Mervyn Doolan, who had an interest in the transaction as he was a beneficiary of a trust that was owed almost $2 million by All Seasons, voted in favour of the resolution, an NZX investigation found.

NZX itself negotiated a settlement with the company which was then rejected by its disciplinary arm, NZX Discipline. VTL then appealed.

Fast forward a couple of years to August 2008, when VTL's finance subsidiary Nathans had gone bust taking $174 million of investors' funds with it, and VTL was shortly to follow.

NZX Discipline tells VTL it will hear its appeal if it wishes to proceed. On November 24, three weeks after it has gone into receivership, VTL tells NZX Discipline it does not.

Another four months of to-ing and fro-ing over a potential settlement ensue before New Zealand Markets Disciplinary Tribunal - as NZX Discipline is calling itself by now - issues this week's statement finding that, yes, VTL did indeed breach the relevant rules.

Stocktakes understands, in line with NZX's policy around these things, none of NZMDT's work around the issue came to light until this week's disclosure.

VTL and Nathans' related party dealings are currently the focus of investigations and actions by the Securities Commission, the Serious Fraud Office, the National Enforcement Unit and the US Securities & Exchange Commission.

Stocktakes wonders whether, had NZMDT's entire process been more transparent and timely, investors in both VTL and Nathans would have been alerted sooner to the related party issues within the companies and thereby saved themselves some money and aggravation.

The NZMDT's executive counsel did not wish to discuss the matter, saying the tribunal was a judicial body.

"Like the courts, it does not provide comment on its determinations."

Capital Punishment for the Deceased

Having found against VTL, NZMDT has punished the company with "a public censure". Given the well-publicised criminal proceedings the company and its directors are already facing, you have to wonder whether they are particularly bothered.

Furthermore, NZMDT has imposed a fine of $30,000 with costs of $10,000. Erm ... the company is in receivership, guys.

To be fair, NZMDT is mindful of this. It says it has applied "a significant discount to the penalty it would otherwise have imposed if the respondent were not indigent". So what are the chances of NZMDT getting its money?

Pretty good, actually. Stocktakes understands NZX already holds a $75,000 deposit from the company from which the fine can be taken. Some might argue that money might have been better going to investors rather than NZMDT.

HEALTHY PERFORMANCE

Health sector smallfry Ebos has been quietly doing comparatively well over the last month or so. Its shares have recovered most of the ground they lost in the September/October market meltdown and were yesterday trading at $4.83, not far off their 12-month high of $5.

Last month the supplier of medical, pharmaceutical and scientific products to the Australasian healthcare market reported a 19 per cent increase in interim earnings to $18.1 million and a 20 per cent increase in net profit to $8.5 million.

Its progress was down to a mixture of organic growth and acquisitions.

Morningstar analysts note its strong balance sheet and low gearing of 32 per cent with no refinancing risk. Morningstar has the stock's fair value at $5.50 but has recently downgraded it from "buy" to accumulate, given its recent price upswing.

BOING!

Hellaby Holdings, which has been severely mauled in recent months, enjoyed a huge bounce yesterday, at one point rising 19c - or more than 40 per cent - to 65c. Alas it couldn't hold on to the gain and closed just 4c up at 50c.

Even by its own recent standards, the investment company had a horrible February, falling from $1.20 early in the month to just 40c by the end, a plunge of 65 per cent. Back in September it was trading as high as $2.15.

Hellaby managing director John Williamson did warn late last year that the company was being buffeted by the worsening economy across each of its four divisions - automotive, equipment, packaging and footwear retail, including Hannahs.

SOME DISCLOSURE

Back door listing Orion Minerals Group, a Chilean iron ore business bought in a reverse takeover by one of Brent Wilkinson's off-the-shelf vehicles, RLV No3, is taking a few liberties with its continuous disclosure requirements. OMG has a deal with Hong Kong company Fengli by which Fengli will purchase 100 million shares in the company.

On January 9, OMG said it had agreed that Fengli would pay US$8 million ($13.9 million) it owed with a US$3 million instalment on or before February 28 and US$5 million on or before March 31.

Subsequent to that, OMG said it had agreed to extend the deadline for the first payment from February 28 to March 15. Thing is, it didn't tell the market of the new arrangement until March 9, well after the original deadline had passed.

Given that over the last year there have been just four trades in OMG shares worth $739, it's safe to assume not many investors are following the stock or care deeply about it, but still, if you're going to list, even if it is on the NZAX, shouldn't you be keeping the market properly informed?

And shouldn't NZX be taking you to task when you don't? Incidentally, RLV No3 was to have been used as the reverse listing vehicle for retail estate firm The Joneses.

ANZ NATIONAL LOOKING FOR FOREIGN CASH

ANZ National Bank looks set to be the first local bank to raise longer-term funds on international money markets using the Government's wholesale funding guarantee.

Bloomberg this week quoted "a person familiar with the transaction", saying ANZ is planning to raise about US$500 million ($868 million) in three-year money using the guarantee which so far has only been used by the BNZ in a local issue.

Bloomberg's source says Barclays, Citigroup and Goldman Sachs are to underwrite the offer.

ANZ National's Virginia Stracey-Clitherow said the bank was unable to make any comment on transactions until they are complete.

The Reserve Bank would no doubt welcome the successful completion of the transaction.

It has repeatedly signalled its concerns about the local banks' post-credit crunch ability to refinance their operations on overseas markets on which they rely for anywhere between 30 and 40 per cent of their funding.

Of New Zealand's $248 billion in current offshore debt, $159 billion is held by the banks and the RBNZ has said that it wants them to hold more of it for longer terms to reduce refinancing risk.