BRL Blackthorn

RNS Number:1158L
Brierley Investments Limited
4 October 2001



    MASNET No. 10 OF 04.10.2001

    Announcement No. 11



    BRIERLEY INVESTMENTS LIMITED



    Air New Zealand Recapitalisation Release



    Singapore, 4 October 2001- The following announcement has today been
    released by Air New Zealand Limited:

    Air New Zealand Release



    "Air New Zealand is to be recapitalised by the injection of up to $885
    million in a two-phase loan and equity investment by the New Zealand
    Government, under the terms of an agreement reached between the
    Government, the Company, and its major shareholders - Brierley Investments
    Limited and Singapore Airlines Limited.

    The Company has also reached agreement with the Voluntary Administrators
    of the Ansett Group to settle claims between the Ansett Group and Air New
    Zealand.

    "We are grateful for the co-operation of all parties in coming to an
    agreement to secure the future of Air New Zealand," the Acting Chairman of
    Air New Zealand, Dr Jim Farmer, said today.

    "The recapitalisation agreement contains arrangements that will enable Air
    New Zealand to start a process of recovery from the severe setbacks it has
    suffered on several fronts," said Dr Farmer.

    Unaudited shareholders funds at 31 August (allowing for the Ansett
    write-off in the financial statements to 30 June 2001) were NZ$506
    million. Since then, the Company has recognised further losses amounting
    to approximately NZ$350 million arising from the closure of Ansett. This
    amount represents the net position after allowing for the settlement
    between the Company and the Voluntary Administrators of Ansett.
    Shareholders funds will then be in the order of NZ$156 million before
    taking into account the trading result for September which will not be
    known for a few days.

    "Once the recapitalisation programme is in place, we have an obligation as
    well as an opportunity to move the Company forward, restore it to
    commercial health and develop its strategic contribution to the transport
    and tourism sectors of our region," Dr Farmer said.

    The first phase of the recapitalisation programme is expected to be
    completed by 19 October 2001. It involves:

    *     A Crown loan to the Company of NZ$300 million.

        *     A payment to the Ansett Group of A$150 million in settlement of
        potential claims by the Group against Air New Zealand.

    *     The balance of the Crown loan being used by the Company for working
    capital.

        *     The Company relinquishing claims against the Ansett Group for
        monies owed, amounting to approximately A$160 million as part of the
        Ansett settlement.

        The loan will bear interest at the 90 day bank bill rate plus 4%
        (in total currently about 9.3%) and interest will be payable on
        repayment of the loan.

    Ansett Settlement

    Under the terms of the agreement reached with the Voluntary Administrators
    of the Ansett Group, the Air New Zealand Group and its directors are to be
    released from all claims relating to the Ansett Group.

    Air New Zealand has also agreed to enter into a commercial arrangement
    with the Ansett Group as a preferred partner and to provide intellectual
    property to assist the Voluntary Administrators to carry on the Ansett
    business as long as it is not detrimental to Air New Zealand.

    The agreement with the Voluntary Administrator is subject to the approval
    of the Federal Court of Australia and the Ansett Committee of Creditors.
    The parties will seek to obtain this approval by 12 October 2001.

    The investigation that is currently being undertaken by the Australian
    Securities and Investment Commission, following its current inquiry, is
    not affected by the settlement.

    The Company's board of directors and its advisers have reviewed other
    potential exposures relating to Ansett and any further liability for the
    Company is considered to be unlikely.

    Crown equity investment

    The second phase of the recapitalisation programme is expected to be
    completed between December 2001 and January 2002. It involves:

        *     The Company's obligation to repay the NZ$300 million loan and
        accrued interest being satisfied by the issue to the Crown of new
        convertible preference shares in the Company;

        *     The investment of up to a further NZ$585 million by the Crown in
        new ordinary shares in the Company; and

    *     The reclassification of the Company's A and B shares into one class
    of ordinary shares.

    The convertible preference shares will be issued to the Crown at a price
    of 24 cents per share or any lower price at which the ordinary shares are
    to be issued to the Crown. They will carry a fixed cumulative dividend of
    5% per annum and will have full voting rights. They will convert on a one
    for one basis on 1 January 2005 or such earlier date as the Crown decides.
    They will not be listed before conversion.

    The issue price for ordinary shares issued to the Crown will be determined
    by the Crown after due diligence, as representing fair value and could be
    higher or lower than 24 cents. In deciding the issue price for these
    ordinary shares, the Crown will not have regard to the issue price of the
    convertible preference shares which represent funds invested in different
    circumstances.

    The precise amount the Crown will invest in ordinary shares (up to NZ$585
    million) will be decided after the Crown has determined the sum required
    to put Air New Zealand on a sound financial footing with a prudent equity
    base.

    The Board of Air New Zealand must also conclude that the issue prices of
    the convertible preference shares and ordinary shares are fair and
    reasonable to the Company and its existing shareholders.

    No further capital will be sought from Brierley Investments Limited,
    Singapore Airlines, or other shareholders as part of the recapitalisation
    package. BIL and SIA have agreed to support the transactions contained in
    the agreement and to vote in favour of the shareholder resolutions to put
    it in place. They will retain their current shareholdings until at least
    31 January 2002, when the recapitalisation process is expected to have
    been completed.

    If the full amount of NZ$885 million is invested by the Crown at 24 cents
    per share it will hold approximately 83% of the enlarged share capital. If
    the issue price is higher the percentage will be correspondingly lower.

    The Board

    The Board of Air New Zealand is to be reduced initially to eight directors
    comprising one nominee of Singapore Airlines (if it requests
    representation), one nominated by BIL, four of the current independent
    directors, and two new directors nominated by the Board and approved by
    the Crown. These changes will be implemented today. The Board will
    therefore comprise:

    Dr Jim Farmer (Acting Chairman)

    Mr Ralph Norris

    Sir Ron Carter

    Ms Elizabeth Coutts

    Dr C K Cheong

    Mr W M Wilson QC

    Mr Roger France - new director approved by the Crown

    One further director to be approved by the Crown

    All other existing directors have resigned with effect from today.

    The Board has been given an indemnity by the Crown in respect of certain
    liabilities relating to the Company's trading between now and the time new
    equity is invested by the Crown.

    Shareholders' approvals

    The necessary approvals for the implementation of the second phase of the
    agreement - including the reclassification of shares and the adoption of
    consequent amendments to the Company's constitution - will be sought from
    Air New Zealand shareholders.

    The Company's annual meeting scheduled for 30 October 2001 will be
    deferred and is likely to be combined with a meeting to approve the
    recapitalisation programme. The likely timing for this meeting is late
    December 2001. A full package of information, including an independent
    appraisal report, will be sent to shareholders before the meeting.



    Conditions

    The principal conditions applying to the implementation of the
    recapitalisation programme are as follows.

    The advancing of the Crown loan is dependent on:

        *     The agreement with the Voluntary Administrators of the Ansett
        Group being approved by the Federal Court of Australia and the Ansett
        Committee of Creditors.

        *     All necessary formal confirmation of ongoing support being
        obtained from the Company's banks and other financiers by 5 October
        2001.

    *     The Board changes being implemented.

        *     The Crown being satisfied as to the extent of the Company's
        residual exposure in relation to Ansett by 5 October 2001.

    The loan is repayable on 31 January 2002 if not earlier replaced with
    equity and is repayable earlier in various events of default.

    The Crown's subscription for shares (convertible preference and ordinary)
    is dependent on:

        *     The completion or continued operation of the agreement with the
        Voluntary Administrators of the Ansett Group.

        *     Completion of due diligence examination of Air New Zealand by
        the Crown to assess its value.

    *     Determination of an acceptable issue price for the new shares.

    *     Shareholder approvals being obtained.

        *     Shareholders collectively holding more than 2% of the existing
        share capital not exercising their minority buy-out rights following
        the shareholders meeting.

        *     Air New Zealand's unsecured bankers agreeing to continue their
        facilities (or replacement facilities) until at least 31 December 2003
        and the Crown being satisfied as to the repayment profile of other
        financiers.

        *     No steps being taken to place any member of the Air New Zealand
        Group in statutory management or liquidation, and no secured creditor
        exercising rights in respect of material assets.

    Business Plan

    The Board has been considering reductions to International and Domestic
    Network Schedules planned by management. These changes to frequency,
    routes and aircraft type will reflect the reduction in trans-Tasman feed
    as a result of the closure of Ansett and the consequences for
    international aviation of the terrorist attacks in America. Details will
    be announced as soon as they have been approved by the reconstituted Board
    in the near future.

    The planned changes will achieve significant cost reductions to reflect
    the reduction in capacity and details of these will also be announced
    shortly.

    Looking further ahead, the Company is well-advanced in preparing a
    business plan for Board consideration reflecting the circumstances in
    which the Company is now operating."



    Comment by BIL

    The Board of BIL believes that the Air New Zealand recapitalisation will
    provide the necessary funding to enable Air New Zealand to continue
    operations.

    The only immediate alternative for Air New Zealand would have been
    statutory management, which in all likelihood would have destroyed all
    remaining value for all stakeholders in Air New Zealand, including BIL.

    The financial impact on BIL cannot be fully assessed until completion of
    due diligence by the Crown, the pricing of the equity issue and
    satisfaction of the conditions detailed above. However, under the terms of
    the package, no further equity will be contributed by BIL.

    If the full amount of NZ$885 million is invested by the Crown at 24 cents
    per share, BIL will hold approximately 5% of the enlarged share capital.
    If the issue price is higher, the percentage will be correspondingly
    higher.

    Under the terms of the agreement, BIL will retain its current shareholding
    in Air New Zealand until completion of the recapitalisation, to be not
    later than 31 January 2002.



    Enquiries:

    Brierley Investments Limited

    Singapore    Tel:      +65 438 0002

    Andrew Shepherd, Chief Financial Officer     Email:   a.shepherd@bil.com.sg

    Gavin Anderson & Company               Tel:  +65 339 9110

    Richard Barton                         Email: rbarton@gavinanderson.com.sg



    Submitted by Jane Teah, Company Secretary on 04/10/2001 to the SGX

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