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Tranz Rail Announces $66 Million Rights Issue


Tranz Rail Announces $66 Million Rights Issue

Tranz Rail is seeking $66 million of new capital through a renounceable rights issue as part of the financial restructuring necessary to settle the letter of credit requirement in the Aratere lease and to secure its ongoing banking facilities.

Last week Tranz Rail announced that it had successfully reached agreement with the Aratere Group lenders and as a condition of this agreement, Tranz Rail is required to complete a capital raising before 31 March 2003. Today’s announcement means the issue will be completed before Christmas.

Tranz Rail Chairman Wayne Walden said today “The capital raising and agreement with the Aratere Group is a positive step forward for Tranz Rail as it removes the level of uncertainty that has surrounded the company’s capital structure for some months”. He also said, “In addition to strengthening Tranz Rail’s balance sheet, the capital raising allows the company to fully pursue its growth strategy”.

Under the terms of the issue, qualifying Tranz Rail shareholders on the register as at 5pm on 22 November will have the right to acquire five new shares for every seven shares they hold, at an issue price of $0.75. The offer document will be posted to eligible shareholders on 24 November and the offer will close at 5.00 pm on 13 December. Shareholders who choose not to take up their entitlements will be able to trade their rights on the NZSE from 25 November. Entitlements will lapse after the close of trading on 13 December. The new shares will begin trading on the NZSE on 16 December.

ABN AMRO Rothschild is underwriting the rights issue and ABN AMRO will be the organising broker.

A total of 88,090,579 shares will be issued and $66 million will be raised with 50% of the net proceeds used to support a letter of credit to the leaseholders of the Aratere ferry and the remaining 50% used to repay bank debt.

During the rights issue due diligence process, the Tranz Rail Board of Directors undertook a rigorous process to update the forecasts based on three-month actuals for the first quarter and revised nine-month forecasts. The resulting forecast operating profit before non-operating revenues and expenses is $53.1 million and largely confirms the company’s previous forecast of $55.8 million. Increased insurance costs and the costs of financial restructuring are the major adjustments from the previous forecast.


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