My adviser had this (inter alia) to say... not happy about the significant conflict of interest in this proposal. Wholly owned subsidiaries of Challenger Ltd (formerly Challenger Financial Services Ltd) act as manager, trustee and hold a 27.7% interest. The Manager has engineered a ?debt crisis? by taking no action to raise new equity or sell assets or to refinance debt maturing in early 2011 as well as talking down the trust's prospects - making it difficult to raise new equity from the public. Challenger's wholly owned subsidiary will get to retain its 27.7% interest and in partnership with the Hong Kong interests seeking to buy out the public at a very large 41% discount to net assets ... doubt the Hong Kong company is motivated by philanthropy, rushing to the aid of unfortunate Australian and New Zealand private investors! A more likely motivation is the opportunity to acquire depressed assets at a significant discount to market value . . . and to profit handsomely over the next few years from their strong cashflows and the recovery in asset values! It is a major conflict that Challenger (i.e. its 100% subsidiary acting as Manager) is recommending that the public investors approve this scheme while it (i.e. another 100% owned subsidiary of Challenger) will be able hold onto its units! How can it be in the ?best interests? of some unit holders (i.e. the public) to sell and some (i.e. the ?insiders?) to hold? If the difference can be explained by the financial resources and investment horizons of individual investors, then the public should also be given the choice to sell now or hold for the long term. It would appear that Challenger (as a 27.7% unitholder) and CK Life Sciences do have a plan to deal with the upcoming debt maturity by their new partnership, but that Challenger (as Manager of the trust) is not undertaking any discussions with the bank or investigating options for raising equity or selling assets ahead of the May 2011 debt maturity. This is a situation where it certainly appears that the Manager has backed investors into a corner . . . before presenting its own offer to buy them out cheaply or else!...If Challenger cannot come up with a better deal than the public selling out at a 41% discount, then unitholders should reject this scheme and seek to appoint a more capable manager for this trust!
CWT Price at posting:
23.5¢ Sentiment: Hold Disclosure: Held
