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Upper Hutt Leader : November 16th 2011
Wednesday, November 16, 2011 SERVING YOUR COMMUNITY SINCE 1939 Letters 10 Real Estate 27-36 Arts 41-42 Motoring 54 Classifieds 55-58 Sport 62-64 PROTECTIVE MOTHER RAPTOR Staglands arrival anticipated 3 ELECTION KICK Schnapps man's election tweets 4 AKATARAWA CELEBRATION New bridges named 40 Who's that with Tennyson?: Cory Jane's two-year-old son Tennyson temporarily upstages his famous All Black dad talking to the massive crowd following Saturday's World Cup parade. It attracted thousands of fans and onlookers along its Main St route and at its finishing point outside the city council. The All Black winger's day was a long one. He spent several hours signing autographs after the formal ceremony, in which he was presented with gifts from the city -- a caricature from local artist Andrew Dunn and a black wood carving from Dane Kingi. More coverage on pages 62 and 64. Photo: COLIN WILLIAMS Son shares heroes' hometown welcome Broadband company's not-so blue chip share offer? By JIM CHIPP Questions were raised about the worth of a broadband network company when it asked for more ratepayer investment from Hutt City Council. Smartlinx3 approached its share- holders, the Upper Hutt, Hutt and Porirua councils, and the Hutt Mana Charitable Trust for a cash injection in May 2006. It wanted another $100,000 from Upper Hutt ratepayers on top of their initial $75,000 investment when the company was established in 2004. It asked for $200 per A-share, with voting rights, and $180 per B-share, without voting rights. A private shareholder has confirmed that he was offered the same class A shares as the councils for $616 each. However, papers obtained by the Upper Hutt Leader last week show that at least one director believed the asset backing for the company s shares to be only $39 at that time and, by the time the shares were drawn in 2007, the asset value was down to $4. Tony Stallinger was Hutt City Council s chief financial officer at the time, and also served for a brief period as a director for Smartlinx3. He did not agree that the share value had been overstated in 2006 and said they were offered at prices relative to the assessed fair value of the company at the time, in line with normal com- mercial practice. Smartlinx3 chief executive and direc- tor David Haynes had wanted the councils money in order to qualify for the Government s Broadband Chal- lenge Fund, which could have been worth up to $4 million to it. In the event it was only granted $2 million, and does not appear to have been able to complete the work necess- ary to collect it all. The company was formed by the councils and private investors in 2004 to establish a broadband network in the Hutt Valley and Porirua to to compete with Wellington s CityLink network. Actual trading figures fell well short of projections right from the start, and in 2008, when annual sales were pro- jected to be $2.5 million, they were less than $170,000. The company lost money heavily and in late 2008 another director warned the board that he believed the company was approaching technical insolvency. All staff should immediately be laid off, and steps taken to avoid illegally trading in insolvency, he told his fellow board members and shareholders. At one point the company defaulted on a $500,000 loan from South Canter- bury Finance and had to ask its share- holder councils for letters of comfort to the finance company. However, Mr Stallinger said it was typical of start-up companies to face liquidity constraints at times but Smartlinx3 had obtained access to funding in order to continue operations and meet its financial obligations. From the outset the company appears to have been structured to avoid any accountability to its major shareholders, the residents and rate- payers of the three cities. Although the three councils and the Hutt Mana Charitable Trust owned more than 70 per cent of the value of the company s shares, they controlled less than 60 per cent of the voting rights. This meant it was not a council con- trolled organisation, which would have been subject to the Local Government Official Information and Meetings Act, and therefore public disclosure of its dealings. Furthermore, the company directors obtained advice from accountants Sherwin, Chan and Walshe as to how they could minimise the amount of information publicly disclosed in the company s annual accounts. Mr Stallinger could not recall any discussion about the Local Govern- ment Official Information and Meetings Act when the company was structured, nor it obtaining advice as to how to minimise obligatory financial disclos- ure. Smartlinx3 is now privately con- trolled by a Maori investment group, Torotoro Waea, following a takeover offer in August this year of $8 per share.
November 9th 2011
November 23rd 2011