Auckland Airport capital raising 'a bit rough' on Auckland Council
Thursday, 16 April 2020
An Auckland councillor has described as 'obscene behaviour' the decision by Auckland Airport not to include the council - its biggest shareholder - in a rapid $1.2 billion capital raising.
Chris Darby called for a snap debate at Thursday's emergency council committee meeting, questioning the circumstances around the capital raising, in which the ratepayers' 21.9 per cent stake ended up being diluted to less than 20 per cent, and why decisions were made without councillors being told.
Council treasurer John Bishop said the council had lost an immediate $18 million in the value of its shareholding last week, and had missed a $70m gain from the subsequent rise in the airport's share price.
The council's treatment in the airport share placement was made public by Australian shareholder activist Stephen Mayne, who alerted councillors by email on Good Friday.
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The council's stake is its biggest single external investment, and from a peak value last year of $2.6b has slumped to $1.6b, with the airport hard hit by the virtual elimination of air travel due to coronavirus.
Council officials on Thursday laid out how the 24-hour capital raising played out, and why the council did not take part to maintain the level of its shareholding.
Auckland International Airport Limited was one of the first major listed companies to use fast-track Covid-19 rules brought in by the stock exchange to raise cash.
Legal manager Bram van Melle said that allowed the company to invite selected parties to take part, and did not have to extend to all major shareholders.
Institutions snapped up the chance to buy $1.2b of new shares at a discounted price of $4.66. Shares had risen to $6.08 by late Thursday
'It's lawful, it's a little bit rough on us, but that's the context we are in, in the market at the moment,' van Melle told councillors.
The capital raising was announced on Monday April 6, and completed the same day.
Mayor Phil Goff was the first to be notified, getting a call the night before from the airport company chief executive Adrian Littlewood.
Goff did not detail the conversation, but described it as a courtesy call to advise of the upcoming placement.
The mayor told council chief executive Stephen Town of the call the following morning, but until Thursday's council meeting, nothing was communicated to councillors.
Town with the mayor's agreement decided not to take part in the placement, and Goff told RNZ of the decision during an interview on Tuesday.
Town, Goff, van Melle and Bishop all said the council would not have been able to make a decision fast enough, even if it had been asked, and wanted to take part.
'Theoretically if we had been able to, for us to maintain 22 per cent we'd have had to invest $263m of new money,' said Bishop.
'There would have been a big question of whether that was a sensible use of council funds at this time, given (Covid-19 related) revenue shortfalls and other priorities,' he said.
Darby was highly critical of the conduct of AIAL's board in not considering the council.
'We are a significant cornerstone shareholder, we have been for 22 years and AIAL ignored us - I take that to be that somewhat obscene behaviour,' Darby told the meeting.
The chair of the Finance and Performance committee Desley Simpson supported the decision not to take part in the placement, but noted that she had not been consulted by the mayor or chief executive.
Darby failed to convince councillors to write to AIAL's board, or to review council policy on its airport shareholding.
However, councillors and the Independent Maori Statutory Board members agreed 18-5 to seek a report looking at improving the council's oversight of the airport company, including whether as the biggest shareholder, it should seek to appoint a director.