On top of the many issues I raised in my previous post, another issue I had was the impact to the NTA as a result of the settlement:
Total payout to be incurred by CRF is $85M
There was a provision of approximately $65M as at 31 Dec 11 for CATS liability (approx 5c per share, 1.3b shares on issue)
NTA 31/12/11: $2.35
If we add back the provision, we get about $2.40.
Class action liability is $85M, which means 6.5c per share payout. NTA is now $2.335
If we had paid cash to CNP secured creditors instead of issuing shares, NTA would reduce by another 6.5c ($85M) to $2.27.
The end result however to CRF was a reduction of NTA to $2.19 primarily because of that ridiculous formula they used to work out how many shares to issue to secured creditors.
Our NTA copped an additional 8c hit as a result.
Why couldn’t the board make the call that instead of issuing shares to compensate them for the $85M class action liability, cash would be paid instead?
In actual fact, even if we decided to payout double the $85M liability to CNP secured creditors (ie $170M cash payout), we still would have been better off. (NTA would have taken another 6.5c hit to $2.205)
Surely, it would have been the interests of the company to sweeten the payout to CNP secured creditors, which would have preserved our NTA.
The new shares they have been issued at current market value are substantially substantially more than the $85M class action liability.
CRF could have offered much more than $85M to the secured creditors and in essence all parties would have happy with this outcome.
10.6.3 of the disclosure document mentions that any such decision for cash vs share issue would be determined by issuers’ duties and as a result in the best interests of investors as a whole so that it is fair between classes of investors
Everything thought it was great when CER announced the sweetened deal to shareholders back in November, however CNP secured creditors pretty much took back what they baited us with.
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