Investing

Business wrap: Kathmandu’s 51% off share sale

Here come the discounted share issues; Kathmandu plans $315m rights issue at 51 percent discount; Rod Duke says 'no thanks'; Treasury hikes borrowing plan by $12b to $25b in two weeks; Pay cuts for Mediaworks and Fletcher staff

Raising cash: In a move that is likely to be widely replicated in coming weeks and months, Kathmandu became the first listed company since the start of the market sell-off to tap shareholders for more cash. Kathmandu said it was optimistic the resulting $315 million in equity would be enough to see it through the current downturn.

The terms? The fully-underwritten offer was at a price of 50 cents per share via a $30 million institutional placement, together with about $177m through a 1.2 for one pro-rata accelerated entitlement offer.

The discount? The 50-cent price was set at a 51 percent discount to the closing price of $1.02 per share on March 30. Since peaking at a record $3.64 on Feb. 10, Kathmandu shares have fallen almost 70 percent. Shares will resume trading today after being in a trading halt since Tuesday.

'You'll never buy better?' Not this time: Briscoe Group managing director and 14.5 percent Kathmandu shareholder Rod Duke said he would not be participating in the $207m equity raising saying he wanted to hold on to his cash to support Briscoes.

Bonds galore: Treasury's Debt Management Office announced plans to issue $17b of government bonds in the next three months after nearly doubling issuance to $25b for the current fiscal year. It said the forecast New Zealand government bond programme for the year to June 30 was $12b higher than the projection just two weeks ago. But remember, the Reserve Bank pledged last week to buy up to $30b of bonds over the next year to keep long term interest rates low.

Still cheap debt (for the borrower): The yield on New Zealand's 10-year government bonds has seesawed in recent weeks as financial markets grapple with the potential consequences of the pandemic. The yield was recently at 1.11 percent, having closed as high as 1.79 percent on March 19 and dropping as low as 0.868 percent. It started the year at 1.61 percent.

Pay cut 1: MediaWorks asked staff to take a “voluntary” pay cut of 15 percent as the owner of TV3 and several radio stations battles for survival. CEO Michael Anderson told staff the business was facing significant financial pressure in the wake of a dramatic decline in advertising as a result of the nationwide lockdown.

A tenant now: In October last year, MediaWorks revealed plans to sell its TV business and its headquarters in Auckland's Eden Terrace.

Pay cut 2: Fletcher Building staff were told they are also in for a significant pay cut. According to the plan to come into effect from next week, non-working staff currently on special leave earning full pay would receive 65 percent of their salaries until April 22. After this, staff pay would decrease to 50 per cent of base pay for a month and would then drop to just 30 per cent for the following month. The company said executive staff pay would be cut by 15 percent.

Dividend cut first: Last week Fletcher Building withdrew its full year guidance and announced it was scrapping its interim dividend.

Loans galore: Nine banks announced they had $6.25b of government-guaranteed money to lend out to tens of thousands of small to medium businesses desperate for the cash. Bankers will be busy in the coming weeks as they attempt to get the money into the accounts of distressed businesses caught up in the national lockdown, now into its second week. But unlike the wage subsidies, these are loans, not grants.

'We're not lending willy nilly': Banks say they will be requiring business to demonstrate the ongoing viability of their businesses and present relevant financial projections as part of the application process.

Fine print to come: Despite the announcement, many of the details, including how much each bank will be allocated, are still to be worked out by Treasury. The scheme rules excluded lending to agriculture, property development and property investment. The nine banks involved are: ANZ Bank, ASB Bank, Bank of New Zealand, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB Bank and Westpac.

Global markets and business

Insiders buying up: In a sign that will be welcomed by investors and market watchers, company executives in the U.S. have begun buying up stocks in record quantities. The ratio of companies with insider buying compared to insider selling is at 1.75 for March, its highest level since March of 2009, according to Washington Service, a provider of insider-trading and data analytics.

Liquidity gauge: Analysts say that insider buying activity provides an insight into which company insiders believe they have the liquidity to withstand a 1-2-month massive decline in economic activity and the solvency to withstand a ‘go forward’ economy that is less robust than the one left behind.

Sorry old chap: Multiple U.K. banks agreed to scrap their dividends and buybacks this year after the regulator pushed to contain spending to shareholders as the coronavirus pandemic upends the industry. HSBC, Royal Bank of Scotland Group Plc, Standard Chartered Plc, Barclays Plc and Lloyds Banking Group Plc have all axed their outstanding 2019 dividends and said there would be no payments at all in 2020. They also agreed to suspend any buybacks.

No pay day: The U.K.’s five biggest banks had planned to pay out nearly 7.5 billion pounds (NZ$15.7b) in dividends over the next two months. Barclays was due to pay more than 1b pounds (NZ$2.09b) this Friday.

Corona Bonds: A new mechanism to enable the issuance of joint euro zone debt to counter economic fallout from the coronavirus epidemic, as recommended by nine European leaders, could take up to three years to set up. France, Italy, Spain and six other countries have called for work on a common debt instrument issued by a European institution to cushion the effects of the pandemic, which is on course to trigger a global recession.

Nein: Not surprisingly, the euro zone’s two least indebted countries, Germany and the Netherlands, strongly oppose such a mechanism, and the nine states who supported it are yet to specify how it would work.

Help is on its way: Facebook is rolling out a new tool that lets its users offer or request help from their neighbours during the coronavirus pandemic. The social network announced the "Community Help" feature, where people can volunteer to pick up groceries, ask someone to complete small jobs or donate to fundraisers.

Zuck to the rescue?: Initially being rolled out in the U.S. but expected to be available here in the coming weeks, users will be able to see posts within a 60-kilometre radius of their location or closer. Facebook said it noticed users offering or asking for help and wanted to build a feature to make the process easier.

What about us? There's a few media companies who'd simply prefer owner Mark Zuckerberg simply handed over some of Facebook's US$52b cash pile... (Note from Eds)

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