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Broker Says Air NZ Capital Can Be Raised At Home

Andrew McDouall Managing Director of McDouall Stuart Securities, a NZSE firm, said this morning that Finance Minister Michael Cullen's concerns over raising capital for Air New Zealand appeared "misplaced".

Mr Cullen said this morning that the New Zealand Government would be reluctant to provide additional capital to Air New Zealand should the proposed Qantas Air New Zealand alliance fall through due to commerce concerns.

Mr McDouall however suggested today that Air New Zealand could most probably raise any capital it needed privately inside New Zealand.

Mr McDouall said the company would be, "well advised to undertake some market testing of the local institutional, broker and private client interest in providing capital to Air New Zealand".

"Based upon a widespread interest in the Invest in Air New Zealand website that McDouall Stuart established in April 2001, I am confident that significant interest could be generated if such an issue was priced appropriately."

At present Qantas has undertaken to invest $550 million in Air New Zealand, of which the first tranche has already been paid, $98 million in the form of 220 million redeemable convertible notes.

Meanwhile, at present the need of the company for additional capital is far from clear.

When the Qantas deal was first announced there was a suggestion of a $200 million rights issue planned for the future to be offered to existing shareholders on a pro-rata basis.

On November 25 the Air NZ Board said, "a final decision was yet to be made" on this deal, "an announcement is expected early in 2003." As yet no announcement has taken place, an indication perhaps that the company is at present not short of capital.

Moreover, yesterday Air New Zealand group announced a $98 million early debt repayment and reported to the NZSE that their current "cash and cash-equivalent resources after this repayment" are approximately $750 million.


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