Govt set to stay main shareholder in bank

Press, 8 June 1989, Page 29

Govt set to stay main shareholder in bank

By PATTRICK SMELLIE, business editor, in Wellington

The Government looks set to remain a majority shareholder in the Bank of New Zealand for the foreseeable future, despite scope for a second significant minority shareholder under the bank’s recapitalisation plan. And sharebrokers yesterday predicted little small investor interest in the $lOO million worth of BNZ shares left over after Capital Markets buys its S3OOM worth.

This was despite the issue price being relatively attractive, they said.

Steady demand for BNZ shares saw them rise to a close of 85c yesterday. Investors paid up to 87c as a high 761,200 shares were bought.

Investors were also seeking shares yesterday in Capital Markets, which gained 13c to 130 yester-

day on a high volume of 480,007 shares. "In the longer term, say two to three years, I see the BNZ as a $2 stock,” said Mr Pieter-Klaus Griegsmann of Ord O’Connor Grieve.

"I think Capital Markets got a very nice deal.” But Mr Roger Armstrong, of Francis Allison Symes, said BNZ shares were worth less than the 70c a share at present.

He predicted there would be little interest in the new BNZ shares from either private or institutional investors from New Zealand. “But some overseas investors are likely to buy it as a recovery stock,” he said. “That has been happening already.” Neither expected the Government would be required to pick up much if any of the SIOOM worth of shares being offered to minority shareholders. Of considerable interest

also is what form the S2OOM of “secured capital” to be issued on top of the S4OOM ordinary’ shares will take.

Sources close to the BNZ and the Government intimated yesterday that while the possibility for a second large minority shareholder existed through the S2OOM issue, this was unlikely to occur. The S2OOM of “near capital” is almost entirely unnecessary to meet the Reserve Bank’s new capital adequacy requirements, and could be issued at any time.

The issue of the new S4OOM of share capital will take the bank’s core capital ratio to 3.96 per cent, only a shade below the 4% required by the Bank’s new international capital standards. The extra S2OOM would take the ratio to 5.15%. Taking the ratios" above the strict levels set by the Reserve Bank was desirable for the BNZ’s status

in world markets, sources said.

But the BNZ was likely to want to retain the ability to repay this extra “capital.”

In addition, the Government wanted to retain majority ownership of the bank in the meantime. Under the Reserve Bank’s guidelines, there are firm restrictions on the kinds of securities which can be offered to qualify as “core capital.”

The bank lists two forms, both perpetual, one of which would be convertible to ordinary share capital at the BNZ’s discretion.

If a convertible security were offered, this would open up the possibility for new large minority shareholders.

However, it would also dilute the Government’s holding in the bank to below its desired minimum of a 51 per cent holding under the existing capital structure.