PropertyFinance proposes debt for equity swap with failed subsidiary

Propertyfinance Group (PFG) has put forward a restructuring proposal that would involve a merger with its subsidiary, Propertyfinance Securities Limited (PFSL), in an attempt to swap debt for equity with secured debenture stock holders of PFSL. It said the proposed restructure would better help the company withstand current market conditions. PFSL was placed in receivership in August 2007 and exited receivership after a restructuring completed in February 2008. Under the proposed plan, secured debenture stock holders in PFSL would swap 9 cents of every dollar invested for cash (already paid under the restructuring proposal), 11 cents of every dollar for 1 year fixed term preference shares in the new company, and the remaining 80 cents would be swapped for ordinary shares, to be priced at 50 cents per share. The NZX shows PFG shares last traded around 10 cents per share. Those holding PFG ordinary shares would be consolidated by retaining one share for every 3.33 shares currently held, PFG said. If the merger were to take place, PFSL's secured debenture stock holders would own about 90% of the new PFG. The restructured company would retain PFG's NZAX listing and continue to be registered as a Portfolio Investment Entity. "In considering the merger proposal the PFG Board explored the alternative of liquidating the business. Given the complex structure and many years before the customers ultimately repay their mortgages, the costs of liquidation would be prohibitive and these would heavily discount likely investor returns," PFG said. "The Board sees this capital reconstruction and merger proposal as the only viable pathway open to the company. It is clear that property market conditions are continuing to deteriorate and this proposal will allow our various stakeholders to protect their investment while providing a dividend bearing tradeable security," PFG Managing Director Darryl Queen said. PFG said was working on the statutory steps to hold a meeting of its debenture holders. For the proposal to proceed the company must get a 75% vote in favour.