Rada stake in NZFP gives positive funds

Press, 25 January 1988, Page 26

Rada stake in NZFP gives positive funds

PA Wellington Rada Corp has positive shareholders’ funds of $3.6 million, but only because its 44 per cent in NZ Forest Products is valued at 425 c a share, well above the prevailing market price.

Rada’s directors disclosed this in a statement to the Stock Exchange on Friday, including a pro forma balance sheet as at December 31.

The company says if the investment in Forest Products had been valued at 280 c a share, as at Wednesday, the balance sheet would have to provide for a further write down of $278.2 million, giving negative shareholders’ funds of $274.6 million. There remains a “sizeable” difference between income from dividends and interest payments, “causing a potential, major cash flow drain,” the statement said. Because of this, Rada’s borrowings, incurred in the lifting of its stake in Forest Products to 44 per cent, are now the subject of a reconstruction programme under discussion between Elders IXL and Rada’s creditors.

Elders, which is set to merge with Forest Products, has agreements for the purchase of shares sufficient to take over Rada.

The Rada directors say that Elders has supported their company while awaiting regulatory approvals to acquire a stake of more than 20 per cent. They add that Elders is looking at strategies that will maximise Rada’s asset values and cash flow.

The Stock Exchange on Friday evening lifted its suspension of Rada shares, along with that of Prorada Properties, after disclosures made by each, including their interim profit statements for the period to last September 30.

The directors of Prorada, also in a statement to the exchange, say that their company’s financial position is sound, despite the value of shares held as security for the repayment of loans to Rada.

Prorada’s balance sheet as at December 31 shows shareholders funds of $82,874,000. The exchange suspended both stocks a week ago because it was

concerned that the market did not have sufficient information about the position of Rada and Prorada.

In meeting the exchange’s information requirements, Rada reported an interim profit of $23 million, which has since been eliminated by the sharemarket crash. The directors concede that the crash has had a “dramatic” impact on Rada’s financial position. They have valued the Forest Products stake at 425 c a share because that is the price which Fletcher Challenge arid Elders had agreed on for a separate purpose.

The latter two companies set the price in respect of the 27 per cent of Forest Products held by Fletcher Challenge which is now to be held in a joint venture with Elders.

The Rada balance sheet shows total investments of $959.7 million, with all except the 47 per cent of Forest Products valued as at January 20. Fixed assets are $3.4 million and current assets $69.8 million.

Positive shareholders’ funds result from $207.6 million in share capital

more than offsetting reserves of $204 million. The directors say that the amount owing for 11 per cent of Forest Products acquired from Amcor is included in current liabilities of $359.6 million.

Elders is set to buy 5 per cent of Rada from Goodman Fielder Wattie when this is given regulatory clearance. It has already bought just under 20 per cent from Goodman Fielder Wattie. In addition, Elders will pick up 27 per cent of Rada from Forest Products, once that too is given approval. In lifting the suspensions, the exchange’s executive director, Mr Roger Gill, said Rada and Prorada had provided sufficient information on which the market could now price their shares. The exchange had found that talks with both last week had been a "useful opportunity to impress upon the new executives of both companies the importance of fully informing the market and ensuring that the companies complied fully with their obligations under their respective listing agreements.”