Maori Spectrum trust borrows $2.6m to maintain 2degrees stake

Network owners Trilogy International charging 10.5 percent interest on loan

Te Huarahi Tika Trust has revealed its commercial arm, Hautaki Trust, has borrowed $2.6 million from 2degrees’s majority shareholder Trilogy International to maintain its stake in New Zealand’s third mobile operator.

At a function held at Te Mahurehure Marae in Point Chevalier last week the trust presented its annual report, which included the 2011 accounts.

The accounts show a debt of $2,630,385 to Trilogy International New Zealand LLC as a result of a loan agreement “to enable the Trust to subscribe for shares in Two Degrees Mobile Limited as they are offered to maintain its shareholding in the company.”

Interest on the loan which is repayable in five years is 10.5 percent and is secured by “the shares acquired from borrowed funds plus an equal number of existing shares...”. Interest of $73,488 had accrued in 2011 and a foreign exchange loss of $26,306 had been recorded as the loan, which is denominated in US dollars, was converted to local currency at year end.

The accounts show the book value of the shareholding in 2degrees rose from $8.87 million in 2010 to $11.47 million, but 2degrees director and Hautaki Trust board member Bill Osborne said the value of shares was shown at cost in the accounts

“They are already worth a lot more than the first lot that we paid for... At the moment the asset is just sitting in the share register, you only know the value of it when you sell it.”

Asked how those these shares will eventually be paid for, Osborne replied: “It’s an issue that the trust has on the table. The plan is to get more Maori involved in shareholding. One of the objectives from the get go was to get Maori more involved in the telecommunications industry and one of the ways of doing that is to get them owning shares.”

A note in the accounts also discloses details of how the 2.1GHz spectrum asset, which was acquired by the trust in 2000 and has been used by 2degrees since 2009, has been paid for.

According to the note 2degrees has paid the Ministry of Economic Development (via the Hautaki Trust) four annual payments of $3,166,667 from October 2009 – this is when the spectrum was uplifted.

Since March 31, the Hautaki Trust has subscribed to a further 4,185,752 shares in 2degrees, bringing its holding in its own right to 4.72 percent. However, the trust is providing “custodial services” in respect of a further 19,498,240 shares on behalf of other Maori groups, bringing the total shareholding in 2degrees to 10.5 percent.

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