The debt savings afforded Auckland Council by the sale of a seven percent stake in its shares of Auckland Airport may have already been reduced by millions due to slow action on the sale.
Although the urgency of a quick sale was emphasised by council officer and elected member alike when the governing body was debating the asset sale, it has been six weeks since the sale was agreed upon.
The annual budget warned delays could reduce the financial benefit of a sale, but also acknowledged the actual date and method of sale would depend on market conditions.
“Maximising sale price will be weighed against the interest costs of delaying sale for too long,” the budget reads. “Professional advice will guide that decision to maximise overall benefit to council.”
At the time, council expected to net a total of around $866 million – 103 million shares at $8.66 each, minus around $26 million presumably for transaction costs.
At Friday’s price of $8.37 per share, council would expect around $30 million less.
“If the share price is less than assumed and/or the transaction impact is greater, the net proceeds will be less than $866 million,” the budget reads. “This will not enable the council to reduce debt by as much and the resulting interest savings will be lower.”
Airport share prices have been on a steady rise since their nadir at the beginning of the pandemic, but month on month there’s still been ups and downs.
Then there’s the interest it might have already paid off if the shares had been sold at the beginning of last month.
The budget suggested each month waiting would cost around $3 million in interest.
Time was of the essence in the debates around the budget, with many involved parties arguing the shares must be sold before the council’s new financial year at the beginning of July.
However, at present the council’s most recent update on what’s happening with the shares comes from July 4, when Auckland Council CFO Peter Gudsell said the council was “now turning its attention to this process” and had appointed UBS New Zealand Limited as financial advisers.
Australian firm Flagstaff Partners have also acted as independent financial advisers to the council.
When Newsroom asked for an update on the shares, a council spokesperson said this update was the latest available information.
“The council is working through the sell-down process and has nothing further to add at this point,” they said.
The council have had Flagstaff on retainer since at least May, when it was asked to explore timing and execution options for the sale.
Waitematā and Gulf councillor Mike Lee said the silence around the sale has been deafening.
“The alleged need to sell was argued by council finance bureaucrats to be urgent and essential,” he said.
“I firmly believed that was not true and clearly I was right. I know that the council’s Australian advisers Flagstaff who pushed the sale as hard as they could, stand to collect a substantial fee.”
He also questioned Flagstaff’s involvement with any potential plans for Ports of Auckland.
“How come these guys get monopoly rights to clip the ticket? They are deeply unimpressive individuals.”
The asset sale was expected to pay for $23 million’s worth of interest payments during this financial year, and $115 million up until 2031.
Tax consultant Terry Baucher said there would certainly be an opportunity cost to any delay to the sale.
“We were told there was a screaming urgency to this sale,” he said. “If it was so urgent, why haven’t they been sold?”
He said delays could depend on who prospective buyers were.
Waikato-Tainui voiced interest in a central government purchase back in June, saying the sell-off “presents a significant opportunity for the Government to purchase the shares and utilise them to settle our remaining claims in the area”.
The iwi sold the idea as a way to keep the airport shares under New Zealand ownership.
But there has been silence from central government on pitching in to buy the shares from council.