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From yesterday's Stuffnz


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The identity of the underwriter of Fisher & Paykel's anticipated rights issue is intriguing market watchers, as the company works its way towards a major financial restructure.

Last week's confirmation that the company will probably need to extend its $80 million interim funding facility beyond Thursday's deadline with the banks only dealt with one aspect of its refinancing talks.

The other concerns wider balance sheet issues and the possible need for a cornerstone shareholder.

When Fisher & Paykel initially dropped that news on the market, speculation centred on the likelihood that United States whiteware maker Whirlpool, F&P's long-term technology partner, was the only candidate able to fill that particular bill.

There was also scepticism that Whirlpool was in sufficient financial shape itself to ride in as white knight.

Then its share price was languishing, but it has since more than doubled to trade last week around $US38, buoyed by the US sharemarket rally.

However, some commentators believe the underwriter of any pro-rata rights issue to shareholders expected to seek to raise between $150m to $200m will be a financial institution which will also become Fisher & Paykel's new cornerstone shareholder.

Market commentator Arthur Lim said Fisher & Paykel did not need a cornerstone shareholder which offered it market access or technology sharing. "Over the years, the company has positioned itself very well in that regard, but what it does need now is more stability in its balance sheet," he said.

Lim said if F&P was sounding out Chinese appliance maker Haier as a likely cornerstone shareholder, "then Whirlpool would have to seriously consider its options".

But he believed Whirlpool would probably be unfazed by a financial institution acting as underwriter to any rights issue, and who had a call option to take up to 10-15% of the company.

He said Fisher & Paykel's likely capital raising provided an opportunity for big financial institutions to secure a stake in companies like the Kiwi appliance manufacturer.

Institutions like Capital Group in the US had been previous significant investors in Kiwi companies like Telecom and Contact Energy. Across the Tasman, institutions like the Commonwealth Bank of Australia were also a possibility.

While they believe an announcement on a rights issue is not far away, market sources say little has emerged in behind-closed-door discussions.

One source said due diligence was being undertaken on the company in Sydney.

Meanwhile, news that Fisher & Paykel was getting more time to work through issues with its bankers was an encouraging sign. It is believed the company has been able to free up cash from liquidation of working capital. That included the successful sale of inventories and an easier credit market, where banks were facilitating trade, and debtors were paying bills again.

"So the urgency for them may not be as great as the market thinks it is," said one source.