Waiver from Listing Rules 5.1.1 and 5.2.1

NZX Regulation Decision
Air New Zealand Limited (NS) (“AIR”)

Application for a waiver from NZX Listing Rules 5.1.1 and
5.2.1






19

March 2020

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Background
1. The information on which this decision is based is set out in Appendix One to this decision.
These waivers will not apply if that information is not, or ceases to be, full and accurate in all
material respects.
2. Capitalised terms that are not defined in Appendix One to this decision have the meanings
given to them in the NZX Listing Rules.
3. The Rules to which this decision relates are set out in Appendix Two to this decision.
Waiver from NZX Main Board Listing Rule 5.1.1
Decision
4. Subject to the conditions set out in paragraph 5 below, and on the basis that the information
provided by AIR is complete and accurate in all material respects, NZXR grants AIR a waiver
from 19 March 2020 from NZX Listing Rule 5.1.1 (
Rule 5.1.1
) to the extent required to allow
AIR to enter into and perform the Loan Arrangements without needing to obtain shareholder
approval.
5. The waiver in of Rule 5.1.1 in paragraph 4 above is provided on the following conditions:
a. That at the time of entry into the Loan Term Sheet, two Independent Directors must
certify (on behalf of the AIR Board) that:
i. the Loan Arrangements have and will be negotiated on an arms’ length basis;
ii. entry into the Loan Arrangements is in the best interests of all AIR shareholders
(other than the Crown); and
iii. the Loan Arrangements are not a major transaction requiring shareholder approval
for the purposes of the Companies Act 1993.
b. That the conditions and implications of the waiver are disclosed in AIR’s next annual
report.
c. That the terms of the Loan Arrangements, when finalised, will not be materially
inconsistent with the terms of the Loan Term Sheet.
Reasons
6. In coming to the decision to provide the waiver of Rule 5.1.1 set out in paragraph 1 above,
NZXR has considered that:

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a. The policy behind Rule 5.1.1 is to regulate those transactions which will significantly
change the nature of an Issuer’s business or which have a value that represents a
majority of the equity that investors hold in the Issuer and, as a result, are deemed to be
so significant to the Issuer, and therefore so likely to impact shareholders’ interests, that
shareholders should have an opportunity to consider the transaction and exercise their
right to vote before the transaction can take effect. The granting of this waiver will not
offend the policy behind Rule 5.1.1.
b. AIR’s Average Market Capitalisation has declined materially as a result of general market
reactions to the COVID-19 virus. From 31 January 2020 to 13 March 2020 (the day Air
New Zealand’s shares last traded), Air New Zealand’s market capitalisation decreased
45%, from $3,166m on 31 January 2020 to $1,729m as at 13 March 2020. Airline
businesses have been disproportionately impacted due to the implementation of travel
restrictions in New Zealand and other countries and the reduced demand for travel in
response to the COVID-19 virus. AIR’s Average Market Capitalisation therefore does not
reflect the size and scale of AIR. AIR’s unaudited financial statements to 31 December
2019 record AIR’s total assets at $8.8bn. Accordingly, in the current market environment
Rule 5.1.1 would impose an unreasonable restriction on the ability of AIR to enter into
reasonable transactions of a material, but appropriate size.
c. The major transaction provisions of the Companies Act 1993 provide that transactions
the value of which exceed 50% of the value of the company’s assets must be approved
by a special resolution of shareholders, or be contingent upon such approval. This
requirement cannot be waived. Accordingly, shareholders are afforded the protections
of the Companies Act 1993 for transactions that are significant compared to the value of
the company’s assets, and will have the opportunity to vote on these transactions. In this
instance, the Loan Arrangements do not trigger this requirement and shareholder
approval is not required by the Companies Act 1993. The conditions of the waiver require
the Independent Directors of AIR to give a certification to this effect.
d. The entry into or performance of the Loan by AIR will not change the essential nature of
the business of AIR.
e. AIR submits, and NZXR has no reason not to accept, that the Loan is in the best interests
of the shareholders as to it will support AIR’s near-term cash needs and alleviate
uncertainty for its shareholders.
f. The Loan Arrangements have been negotiated on an arms’ length basis.
g. NZXR considers that the convening of a shareholder meeting in the manner
contemplated under Rule 5.1.1 would be disproportionate given the urgency of the

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funding required and the costs, timing and logistical implications of convening such a
meeting.
h. There is precedent for this decision.
Waiver from NZX Main Board Listing Rule 5.2.1
Decision
7. Subject to the conditions set out in paragraph 8 below, and on the basis that the information
provided by AIR is complete and accurate in all material respects, NZXR grants AIR a waiver
from 19 March 2020 from NZX Listing Rules 5.2.1 (
Rule 5.2.1
) to the extent required to allow
AIR to enter into and perform the Loan Arrangements without needing to obtain shareholder
approval.
8. The waiver in of Rule 5.2.1 in paragraph 7 above is provided on the following condition:
a. That at the time of entry into the Loan Term Sheet, two Independent Directors must
certify (on behalf of the AIR Board) that:
i. the Loan Arrangements have and will be negotiated on an arms’ length basis; and
ii. entry into the Loan Arrangements is in the best interests of all AIR shareholders
(other than the Crown); and
iii. the Crown, as the majority shareholder in AIR, has not influenced the AIR Board’s
decision to enter into the Loan Arrangements.
b. That the conditions and implications of the waiver are disclosed in AIR’s next annual
report.
c. That the terms of the Loan Arrangements, when finalised, will not be materially
inconsistent with the terms of the Loan Term Sheet.
Reasons
9. In coming to the decision to provide the waiver of Rule 5.2.1 set out in paragraph 1 above,
NZXR has considered that:
a. Rule 5.2.1 seeks to regulate transactions where a Related Party to a Material
Transaction may gain favourable consideration due to their relationship with the Issuer.
NZXR has noted in the Guidance Note regarding Rule 5.2.1 that it may waive the
requirement to obtain approval of a Material Transaction if it is satisfied that the
involvement of any Related Party is plainly unlikely to have influenced the promotion of,

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or the decision to enter into, the transaction. The granting of this waiver will not offend
the policy behind Rule 5.2.1.
b. AIR has submitted, and NZXR has no reason not to accept, that the Crown (as the
Related Party) is plainly unlikely to have any influence over AIR’s decision to enter into
the Loan Arrangements as:
i. the need for the Loan Arrangements arose as a result of external factors currently
adversely affecting AIR, namely the travel restrictions in New Zealand and other
countries and reduced demand for travel as a result of the COVID-19 virus;
ii. entry into, and the terms of, the Loan Arrangements was negotiated on an arm’s
length basis; and
iii. while the Crown is the majority shareholder in AIR, it is not involved in AIR’s business
operations. In addition, while the Crown does vote shares to approve the appointment
of directors, it does not select and appoint directors to the AIR Board.
c. The condition at paragraph 8(a) provides comfort that any decision to enter into the Loan
Arrangements will be considered on an arms’ length basis, that the Loan Arrangements
will be in the best interests of all AIR shareholders, and that the Crown’s connection as
the majority shareholder in AIR has not influenced the AIR Board’s decision to enter into
the Loan Arrangements.
d. NZXR considers that the convening of a shareholder meeting in the manner
contemplated under Rule 5.2.1 would be disproportionate given the urgency of the
funding required and the costs, timing and logistical implications of convening such a
meeting.
e. There is precedent for this decision.

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Appendix One
1. Air New Zealand Limited (NS) (
AIR
) is a Listed Issuer with Equity Securities Quoted on the
NZX Main Board, and Debt Securities quoted on the NZX Debt Market.
2. The COVID-19 virus has had a material adverse impact on AIR’s operations and financial
performance and position, due to travel restrictions in New Zealand and other countries and
reduced demand for air travel. The nature of AIR’s cost structure means that it is forecasting
material operating losses for the foreseeable future. As a result, AIR considers that it needs
to put in place additional loan facilities to support its near-term cash needs.
3. AIR has sought loans from local and international trading banks. However, the uncertainty
surrounding the impact of the Government’s decision to require mandatory self-isolation for
persons entering New Zealand has made it impossible for those banks to progress any
financing proposal.
4. Accordingly, AIR is negotiating with the Crown on an arms’ length basis for the provision by
the Crown of a loan (the
Loan
) secured over all of AIR’s present and future assets (other than
aircraft assets subject to a mortgage and other aircraft assets and ancillary rights that cannot,
by the terms of the relevant financing, be subject to security in favour of the Crown).
5. The Loan will be documented initially in a binding terms sheet (the
Loan Term Sheet
), which
will then be converted into a long form loan agreement on terms which are not materially
inconsistent with the Loan Term Sheet. The form of security documentation will also be
agreed. The Loan Term Sheet, and the long form loan agreement and associated security
documentation (together with all other and incidental documentation between AIR and the
Crown) are referred to collectively as the
Loan Arrangements
.
6. The Loan Arrangements are being negotiated on an arms’ length basis. Both parties are each
independently advised.
7. The Board of AIR considers that it needs to urgently enter into the Loan Arrangements to
support AIR’s near-term cash needs and to alleviate uncertainty for its shareholders as there
is no other realistic source of the required funding in the time required.
8. Although the quantum of the Loan remains subject to negotiation, it is anticipated that the
Loan Arrangements:
a. may be a Major Transaction for the purposes of Rule 5.1.1 because it may involve AIR
entering into a transaction with a Gross Value in excess of 50% of its Average Market
Capitalisation; and
b. will be a Material Transaction for the purposes of Rule 5.2.1 because it will involve AIR
borrowing an amount in excess of 10% of its Average Market Capitalisation.
9. The Crown is a Related Party of AIR because the Crown is a 51.91% shareholder of AIR
exceeding the 10% threshold pursuant to the definition of Related Party in the NZX Listing
Rules.

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Appendix Two
Rule 5.1 Disposal or Acquisition of Assets
5.1.1 An Issuer must not enter into any transaction, or a related series of transactions, to
acquire, sell, lease (whether as lessor or lessee), exchange, or otherwise (except by way
of charge) dispose of assets where the transaction or related series of transactions:
(a) would significantly change, either directly or indirectly, the nature of the Issuer’s
business; or
(b) involves a Gross Value above 50% of the Average Market Capitalisation of the Issuer,
Unless the transaction, or related series of transactions, is:
(c) approved by an Ordinary Resolution, or a special resolution if approval by way of
special resolution is required under section 129 of the Companies Act 1993, or
(d) conditional upon such approval required by paragraph (c) above.
Rule 5.2 Transactions with Related Parties
5.2.1 An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to
become:
(a) a direct party to the Material Transaction; or
(b) a beneficiary of a guarantee or other transaction which is a Material Transaction,
unless that Material Transaction is approved by an Ordinary Resolution (such resolution
being subject to the voting restrictions in Rule 6.3) or conditional on such approval.

“Material Transaction” means a transaction, or a related series of transactions, whereby
an Issuer:
...
(c) borrows, lends, pays or receives money, or incurs an obligation of an amount above
10% of the Average Market Capitalisation of the Issuer (except in the case of an issue of
Debt Securities, in which case only the nominal amount of Debt Securities being issued
to any Related Party or to any Employees of the Issuer are to be taken into account);

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“Related Party” means a person who, at the time of a Material Transaction, or at any time
within the previous six months, was:
...
(b) the holder of a Relevant Interest in 10% or more of a Class of Equity Securities of the
Issuer carrying Votes.