The New Zealand Shareholders’ Association says Precinct Properties came up with an “innovative” solution to overcome the unfairness to retail investors of its up to $160 million capital raising.

Precinct raised $130 million from a placement to institutional investors last week at $1.48 per share.

The shares were trading at $1.535 the day before the capital raising was announced, and were recently at $1.485. 

The rest of the money will be raised from retail investors who can apply for up to $50,000 worth of shares each and Precinct is allowing for up to $10 million of over-subscriptions.

The retail offer, which is underwritten by Credit Suisse and FNZC, closes on March 5.

“In our view, their solution is innovative and, while not a formal rights issue, it will largely achieve the same outcome,” NZSA says in advice to members.

That’s because the total amount available means that, based on historical uptake, 99 percent of shareholders will be able to take up at least the same value of shares as they would have received in a rights issue, even if the offer is over-subscribed and allotments have to be scaled, the organisation says.

“The largest retail shareholders were given access to the institutional placement in order to preserve their positions.”

Nevertheless, NZSA clearly didn’t think much of the reasons Precinct gave it for not raising the money via a rights issue, NZSA’s preferred method of capital raising since it treats all shareholders equally.

“Precinct told us that they chose not to do a full rights issue for two main reasons. Firstly, they wanted to complete the price setting for the offer quickly, given the more volatile market conditions at present and, secondly, their major shareholder Haumi was not participating, which potentially could leave a shortfall,” it says.

“Given the availability of accelerated rights issues and full underwriting, we think the reasons are unconvincing,” NZSA says.

The property investor and developer won’t need the funds in a hurry – it said it will use the proceeds to initially pay down debt and on medium term development opportunities including the Bowen Campus stage two in Wellington and the Wynyard Quarter stages three and four.

It will reduce gearing from an already low 24.3 percent to 18.5 percent.

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