NZX Regulation agreed today to a Fletcher Building Ltd request to have its 7 existing tranches of capital notes, and any future issues, reclassified as debt securities for the purposes of exchange listing rules.
Definition of notes â€“ ostensibly issued as debt â€“ has been a movable feast for years. Price & convertibility have influenced issuers in some significant cases, where the decision on whether notes were debt or equity could have had a highly damaging effect on covenants.
Fletcher Building said its notes had been classified as equity securities, but after a 3 May change to the NZX listing rules, and for consistency with Australian Stock Exchange rules, they should be classified as debt securities.
Fletcher Building said its capital notes were long-term, unsecured subordinated fixed-interest debt obligations, and on maturity it was up to the noteholder â€“ not the company â€“ to elect whether to accept new conditions or to convert to shares.Fletcher Building retained the right to override that election by either buying or redeeming the notes for principal plus outstanding interest.