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GPG capital noteholders could meet to consider fate under demerger

GPG capital noteholders could meet to consider fate under demerger

Frustrated Guinness Peat Group shareholders, expecting cash back from the break up of the Ron Brierley chaired investment company, will have to stand in the queue behind the group's more than 10,000 capital note holders whose NZ$427 million worth of notes may be bought back before shareholders receive any cash.

Bryan Connor, general manager for corporate trusts at Guardian Trust, the trustee for GPG's capital noteholders, told  trustee representatives had held a "very quick discussion" with GPG about what GPG's demerger plans might mean for capital note holders. GPG is proposing to demerge its Australian operations.

However the group's New Zealand director Tony Gibbs was fired late last month after he publicly withdrew support for the proposal and called for a material cash distribution to shareholders by year's end and a trade sale or float of thread maker Coats, GPG's biggest asset, as soon as possible after December 2010 with those proceeds also paid to shareholders.

Connor said Guardian Trust was watching the developments with interest.

"Like everybody we all know Tony Gibbs very well so [his departure] is a bit of a shame really. At this stage what you're seeing is just a very broad proposal, we haven't actually seen any specifics about how it's all going to work and until the specifics are sorted there's nothing much anyone can do," said Connor.

"They (GPG) are still looking at the detail and when they've got some detail they'll sit down and talk to us about it."

Connor said one of the options, once details were available, was holding a noteholder meeting to consider options. Guardian Trust hadn't done much work yet to determine what the company's break up might mean for capital note holders and wouldn't until details were available.

The capital notes are unsecured and subordinated to any GPG secured debt arrangements, but rank "one step ahead of shareholders," Connor noted. One option for GPG will be repurchasing the notes for cash or swapping them for shares, with the former viewed as the more likely option. It is possible, however, they could remain on issue until their redemption dates.

GPG's 10,230 capital note holders are being paid interest of either 8.3% or 9% per annum. As of December 31, 2009, GPG also had bank borrowings of 315 million pounds, or about NZ$695 million at current exchange rates. As of December 31, 2009, that meant GPG's combined NZ$1.1 billion worth of capital notes and bank debt was worth just under half the group's NZ$2.5 billion worth of assets.

The capital notes are in two tranches. There's a NZ$350 million issue dating from 2006. Those notes expire on November 15, 2012. Then there are 2008 notes, initially a 2003 issue with NZ$77 million worth rolled over and still on issue, after investors' holding NZ$138 million of the notes chose two years ago not to roll them over and had their notes repurchased and cancelled by GPG. The remaining 2008 notes expire on December 15, 2013.

Gibbs, meanwhile, who remains chairman of insurer and fund manager Tower and fresh produce distributor, marketer and exporter Turners & Growers, is now being tipped to turn up on the boards of a couple of other major corporates.

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