24 Jun 2010

Hang in there, Dorchester urges investors

7:49 am on 24 June 2010

Dorchester Pacific has told investors that its prospects are solid and its key shareholders are in it for the long haul as they consider another financial restructuring plan.

The finance firm is undertaking a roadshow to convince investors to accept a new repayment plan under which they would own four hotels and a mixture of interest-bearing notes and shares in Dorchester Pacific.

It estimates debenture holders would get back between 85c and 91c in the dollar, including the 50c they've already been paid.

The firm argues receivership is the poorer option, returning only 66c to 76c.

This plan is different - director

Dorchester Pacific's executive director, Paul Byrnes, facing about 70 investors in Wellington on Wednesday, confessed that the global financial crisis and the decimation of the property market had defeated the company's first repayment plan.

When he offered the new plan, some investors said it smacked of the Allied Farmers-Hanover deal, which was followed by a collapse in the rural services firm's share price.

Mr Byrne said Dorchester's plan is different, with new money from the main shareholders and well-run properties that are conservatively valued.

Many investors, while angry and frustrated by the company's dismal performance, seemed supportive of the proposed changes.

$8m capital raising also proposed

Investors are also be asked to support plans to raise $8 million to bolster the company's financial position, underwritten by major shareholders the Business Bakery and Hugh Green.

Business Bakery's Grant Baker, who is the incoming Dorchester chairman, says he'd like to mop up as many shares as he can, as he thinks Dochester's slimmed-down finance and insurance arms are performing well and their prospects are good.

Meanwhile, at the request of the Securities Commission, Dorchester says the net present value - which shows the value today of money to be received or paid in the future - of the potential returns would be 33c under the plan and 19c under receivership.