Dorchester to issue up to $12 million of Convertible Notes

22 August 2011

COMPANY ANNOUNCEMENT
Dorchester to issue up to $12 million of Convertible Notes
Annual General Meeting to be held 27 September 2011

Dorchester Pacific Limited (DPC) today signalled its intention to raise wholesale funding through the issue of up to $12 million of Convertible Notes. The Notes will have just over a three year term to 31 March 2015 with an option then (or earlier on a takeover) for holders to convert into ordinary shares at 10 cents per share.

The issue will be underwritten to $10 million by three major shareholders, Hugh Green Investments Limited, The Business Bakery LP and Paul Byrnes. The offer will also be open to professional investors with a minimum $500,000 participation.

“Dorchester Finance had intended to have in place a $10 million facility one year after its restructure but the banks have told us that we need ‘more runs on the board’, explained CEO and Executive Director, Paul Byrnes. “Our major shareholders have therefore stepped up to underwrite the Notes to $10 million. This will ensure that growth momentum is maintained in the medium term and that the longer term profit prospects of Dorchester are realised.

Both Dorchester Finance and Dorchester Life subsidiaries are performing ahead of forecast and we are on track to step over the break-even trading milestone on a group basis this financial year. We believe this puts the business in a good position to secure bank funding in the future”.

Grant Baker, Chairman of Dorchester added: “We are very happy with the progress in the first year given that’s the riskiest period in any major restructuring. The really pleasing thing for me is that we have found no reason to change our strategy.

We have no doubt that the finance sector has a big part to play in New Zealand’s economy and in its growth and we are excited about the role Dorchester can have in developing the sector.

With capital markets still uncertain we understand we need to get more runs on the board to enhance our further borrowing status. The major shareholders are clearly demonstrating their belief in Dorchester’s prospects by backing this issue to such an extent.

The initiative is about maintaining momentum and continuing to build a strong business with solid foundations for the benefit of all shareholders.

It also provides current option holders the opportunity, but not an obligation, to exercise their 2013 Options earlier, in June 2012, at 10 cents per share as opposed to the 2013 exercise price of 12.5 cents per share”.

Dorchester has engaged Simmons Corporate Finance to provide shareholders with an Independent Advisers Report and an Independent Appraisal Report that will assess the merits of the proposed issue which requires shareholder approval.

Dorchester has decided to hold its Annual Meeting of shareholders (AGM) on 27 September 2011 so that the initiatives can be considered and voted on at the AGM.

Shareholders will be mailed out the Notice of Meeting together with the Independent Advisers Report in early September.

ENDS

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