metlifecare rejects notice to terminate scheme ...€¦ · page 2 of 2 there is no basis to suggest...
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MEDIA RELEASE
28 APRIL 2020
METLIFECARE REJECTS NOTICE TO TERMINATE SCHEME
IMPLEMENTATION AGREEMENT
Metlifecare Limited (NZX: MET, ASX: MEQ) has today received a notice to terminate the Scheme
Implementation Agreement (SIA) entered with Asia Pacific Village Group Limited (APVG), an entity
owned by EQT Infrastructure IV fund and managed by EQT Fund Management S.à.r.l.
The Metlifecare Board has rejected the notice to terminate from APVG as entirely invalid and reiterates
its belief, based on legal advice, that there is no lawful basis for APVG to terminate the SIA.
Under New Zealand law, an invalid termination is treated as a ‘repudiation’ of the contract enabling
the non-defaulting party to elect to either (i) cancel the contract and seek damages or (ii) continue
with the contract and require the defaulting partly to perform its obligations.
Metlifecare remains strongly committed to the successful completion of the scheme in the interests
of all shareholders and remains on track to dispatch the scheme materials ahead of a shareholder
meeting to vote on the scheme, intended to be held at 11am on 9 June as a ‘virtual’ meeting, subject
to receipt of orders from the High Court.
Metlifecare Chair Kim Ellis said: “The fundamental assumptions that APVG uses to justify its Notice to
Terminate are simply wrong. There has been no breach of the ‘Material Adverse Change’ (MAC)
metrics and/or any ‘Prescribed Occurrence’, as claimed by APVG, and such breaches, if they were to
occur, would be covered in either case by specific exceptions under the SIA. Metlifecare considers
APVG and its parent company EQT have misstated the terms of the SIA and are wrongly attempting
to withdraw from an agreement they willingly entered less than four months ago. We expect them
to honour their obligations under the SIA.”
On 8 April 2020, Metlifecare informed the market that it had received from APVG a notice of its
intention to terminate the SIA. Metlifecare’s response to APVG’s accusations, which the Board
considers are without foundation, was summarised in its Market Update on 20 April 2020. Metlifecare’s
position is further detailed in its formal response to the notice of intention to terminate, which was
provided to APVG on 23 April 2020 and is attached to this release.
In summary, among other matters the Board notes that:
On the basis of information available to it, Metlifecare does not consider either of the MAC
metrics – related to consolidated net tangible assets (NTA) and consolidated underlying net
profit – has been triggered or is reasonably likely to be triggered;
To the extent there may have been a reduction in Metlifecare’s consolidated NTA or itsreasonably expected consolidated underlying net profit, this is the result of changes in generaleconomic conditions or changes in law as part of the New Zealand government’s Level 4lockdown restrictions. Changes in general economic conditions and changes in law are carve-outs under the MAC;
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There is no basis to suggest that these changes in general economic conditions and changesin law have had a materially disproportionate effect on Metlifecare, as would be requiredunder the MAC; and
Metlifecare has, at all times, provided information where reasonably requested by APVGunder the SIA. In any event, none of the matters that have been the subject of the recentdetailed communications between the parties are sufficiently material to the group as awhole to justify termination, even if there had been any breach in respect of them.
As foreshadowed on 20 April, Metlifecare has retained the services of Stephen Hunter QC to assist it,
alongside top tier New Zealand law firm Chapman Tripp.
Metlifecare shareholders do not need to take any action at this time.
This announcement is authorised for release to the market by the Board of Metlifecare Limited.
Ends
For more information please contact:
Clive Mathieson
Mobile: +61 411 888 425
About Metlifecare Metlifecare is a leading New Zealand owner and operator of retirement villages, providing rewarding lifestyles
and outstanding care to more than 5,600 New Zealanders. Established in 1984, it currently owns and operates
a portfolio of 25 villages in areas with strong local economies, supportive demographics and high median house prices, located predominantly in New Zealand’s upper North Island.
23 April 2020
Nathalie Brabers-Jastrow
Asia Pacific Village Group Limited
c/- Bell Gully Level 22 Vero Centre
48 Shortland Street
Auckland 1010
New Zealand
Email: [email protected]/
with a copy to:
EQT Partners Singapore Pte Ltd,
1 Raffles Place, #29-62 One Raffles Place
Tower 2, Singapore 048616
Email:[email protected]
EQT Fund Management S.à r.l. (acting as
manager (gérant) of the fund known as
EQT Infrastructure IV Fund)
26A, Boulevard Royal, L-2449 Luxembourg
Email: [email protected]
EQT Fund Management S.à r.l. (acting as
manager (gérant) of EQT Infrastructure IV
EUR SCSp and EQT Infrastructure IV USD
SCSp) 26A, Boulevard Royal
L-2449 Luxembourg
Grand Duchy of Luxembourg
Email: [email protected]
Dear Nathalie
APVG’s 7 April 2020 notice of intention to terminate SIA
We refer to your 7 April 2020 Notice of Intention to Terminate the Scheme Implementation
Agreement between Metlifecare Limited and Asia Pacific Village Group Limited, dated 29 December
2019 (Notice).
Metlifecare does not consider there to be any ground for a valid termination, for the reasons
summarised in this letter.
Your fundamental assumption is not correct
Underlying your Notice is the fundamental assumption that COVID-19 has caused and will cause
serious, widespread and lasting detriment to Metlifecare’s business. That is not the case. The five
week Level 4 lockdown (lockdown) has created some immediate practical issues for the business,
and in the short to medium term the general economic conditions are likely to be less favourable,
but the virus itself has not damaged Metlifecare’s business or business model.
Metlifecare is currently operating under the New Zealand Government’s stringent Level 4 lockdown
restrictions. These restrictions came into effect at 11.59pm on Wednesday 25 March 2020. The
lockdown is to remain in place until 11.59pm on Monday 27 April 2020, at which point New
Zealand will move to the recently announced Level 3 restrictions.
2
As an operator of retirement villages and care homes, Metlifecare, like its sector peers, is an
“essential services” provider, which means it is able to continue operating its villages and care
homes providing core services to residents. Current village and care home occupancy levels are
high. ILU occupancy has been at 97% for well over a year. Aged care occupancy has increased
during the period of lockdown from 93% to 95%, as two new care homes (Papamoa Beach Village
and The Avenues) filled up. Aged care occupancy was 92% as at the end of February.
Metlifecare is continuing to actively advertise and approach prospective residents, however, under
the lockdown, Metlifecare, like its sector peers, is restricted from showing prospective residents
around its villages.
In the few days prior to the commencement of the lockdown, ten Occupation Right Agreement
settlements were brought forward at the request of incoming residents to allow them to move into
their new homes ahead of the lockdown being imposed. As expected, as a result of the current
restrictions, 32 settlements are temporarily delayed. Ten settlements have still occurred during
lockdown. From this point through to the end of May 2020, we are anticipating around 50
settlements.
In line with the lockdown requirements, Metlifecare and its development partners have also
temporarily paused all construction activity. You have received considerable detailed information
on those temporary pauses in construction.
Metlifecare is now preparing its transition as New Zealand moves out of the Level 4 lockdown and
into Level 3 from Tuesday 28 April 2020.
At Level 3, removal companies will be allowed to operate as needed to allow residents to move
into their units, and so all the currently delayed and planned settlements can proceed. Sales
activity is expected to increase, with prospective residents able to make appointments to view
villages, however Metlifecare is still unable to organise open days, or permit prospective residents
to turn up unannounced. Construction activity will also re-commence.
You cite four factors in particular in your Notice:
1. You say that the elderly are particularly vulnerable.
2. You say that COVID-19 cases have occurred in NZ aged care facilities and retirement
villages.
3. You record that retirement village operators have taken certain actions.
4. You allege that the continuing impact of COVID-19 is materially adverse.
Metlifecare strongly disagrees with your conclusion, which we consider to be overly simplistic. In
overview, it is not correct to characterise COVID-19 as a pandemic that, in and of itself, will cause
widespread harm to either the retirement village sector or Metlifecare.
COVID-19 in New Zealand
The spread of COVID-19 in New Zealand differs from the experience in other countries, including
Sweden. In New Zealand, infection and transmission rates to date have been much higher in
younger age groups. The spread to those 70 years and over is low compared to other developed
countries.
3
New Zealand cases by age1
The death rate in New Zealand is one of the lowest in the world.2 New Zealand has had much
lower rates of community transmission than in other countries.3
It is correct that stand-alone aged care facilities have been at the centre of some of the “clusters”
of infection in New Zealand. Those facilities are not retirement villages, and operate very
differently to Metlifecare. They are standalone care facilities, which Metlifecare does not operate.
While our business does include some care facilities, they are integrated within retirement villages.
Metlifecare implemented strict measures at an early stage to keep its residents safe from COVID-
19 and to avoid the risk of transmission in its villages. On 21 March 2020 the Government advised
all over 70s to stay home. These steps have contributed to keeping the over 70s population safe in
New Zealand.
1 https://www.newsroom.co.nz/2020/04/13/1101216/covid-19-in-nz-the-numbers.
2 https://www.worldometers.info/coronavirus/; https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-novel-coronavirus/covid-19-current-situation/covid-19-current-cases#transmission; “UBS New Zealand Equity Strategy: COVID-19: A Path to lower cost suppression – 9 April 2020”.
3 https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-novel-coronavirus/covid-19-current-situation/covid-19-current-cases#transmission; “UBS New Zealand Equity Strategy: COVID-19: A Path to lower cost suppression – 9 April 2020”.
4
Clearly, the lockdown currently in place has interrupted sales and construction, but the restrictions
were eased by the change to the lockdown statutory instrument, which commenced on 22 April
2020, and will be further eased on expiry of the lockdown.
The New Zealand Government’s response to COVID-19 positions New Zealand well to eradicate the
virus and transition to a return to business as usual sooner than other countries who are adopting
different response strategies.4
Metlifecare Performance
Prior to the lockdown, Metlifecare’s financial and non-financial performance, and business outlook
was strong, even after significant international events in relation to COVID-19.5 This is
demonstrated through, for example:
MET financial performance and share price.6 (See further Annexure A and B)
Metlifecare applications.7
Sales tracker reports.8
4 “UBS New Zealand Equity Strategy: COVID-19: A Path to lower cost suppression – 9 April 2020”. See also 19 April 2020 Prime Minister and Director-General of Health All of Government briefing: Ardern said that it is incredible to think of how slickly New Zealand acted together, and noted it has been only 32 days since the borders were closed to all but returning New Zealanders, 30 days since the Government announced the COVID Alert Level system, and 25 days since the lockdown began. She said that during this time the focus of the Government has been to protect the health of New Zealand and to cushion the economic blow to keep as many New Zealanders in jobs and help businesses remain viable. She says the Government does not underestimate the economic impact this has had, and said this is why there has been the multi-billion dollar series of investments including the 12 week wage subsidy scheme, the Government backed business finance scheme with banks, the business support package, and extra financial support for students. She said that the decision to move New Zealand to Alert Level Four was the right one for health and the economy.
5 As noted in MET’s market announcement of 20 March 2020.
6 MET’s half year result on 26 February 2020 (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/348968/317499.pdf); MET’s market announcement on 20 March 2020 (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/350378/319299.pdf). MET’s financial performance had been very strong with no material financial impact.
7 “FY20 applications – 20.4.2020”.
8 “Sales Tracker 20 April 20”; “Resales Performance v Prior Year”.
5
Resales well-ahead of last year until 26 March
Expected settlements well-ahead of last year until 26 March
Economic activity in the retirement village sector prior to the lockdown also indicates generally consistent business performance.9
9 See Annexure A. For analysis on the retirement sector performance prior to the lockdown see the various broker reports published by, for example, Deutsche Bank, Forsyth Barr, Credit Suisse, Macquarie Research, and UBS Research in respect of Metlifecare, Arvida Group Ltd, Oceania Healthcare Limited, Ryman Healthcare Group Limited and Summerset Group Holdings Limited.
6
The experience of the drop in share price in overseas markets that you refer to is not relevant.
Obviously, the fundamental characteristics of listed enterprises in other markets differ for a range
or reasons, including the business environment prevailing in the jurisdictions in which they
operate, capital structure, tax regimes, regulatory environments, interest rates, competitive
dynamic, political situations (federal and state), population and so forth. By contrast, the New
Zealand equity market has different characteristics and concentrations of listed companies. For
example, the NZX50 index is influenced by F&P and A2 Milk and concentration of certain sectors
including listed retirement villages.
In addition, Metlifecare’s financial performance is a function of its long term cash flow profiles as
reflected in the Metlifecare model assumptions and outputs. Even amongst the listed retirement
sector, the financial outcomes vary for a range of factors such as the constituent company debt
profile and weighting towards retirement living versus aged care.
MAC trigger thresholds not reached
On the basis of information available to it, Metlifecare does not consider either of the MAC metrics
triggers has been triggered or is reasonably likely to be triggered.
NTA trigger
Metlifecare reported its half year financial results on 26 February 2020. At that time, Metlifecare’s
consolidated net tangible assets (NTA) were $1.49b. The half year carrying values were reviewed
by PricewaterhouseCoopers.
Metlifecare has not made any continuous disclosure release to indicate that its consolidated NTA
has fallen by more than $100m. The Board carefully considered carrying values (as it ordinarily
does in February) in conjunction with finalisation of the 31 December 2020 half year results.
Metlifecare has no reason to believe that CBRE will be changing its methodology or basis of
valuation before 4 May 2020. CBRE is not scheduled to undertake a new valuation until July 2020
(as at the position at 30 June 2020). The external valuations are based on forecast village cash
flows over a long-term, 20-year period that mitigate the impact of short-term unit price
movements. Metlifecare provided valuation sensitivity analysis in its 2019 annual report, available
at www.metlifecare.co.nz/investor-centre
Underlying profit trigger
Since 29 December 2019, Metlifecare has kept under review the financial and non-financial
performance and standing of the business under review as it does in any financial year. Monthly
management accounts have been prepared and considered, and variances reported and discussed
by the board.
As shown in Annexure C, year on year revenues until end March 2020 were well ahead of the prior
comparative period.
Metlifecare’s board discussed management’s scenario analysis on 31 March 2020, as shared with
representatives of EQT on 1 April 2020. Since that analysis, Metlifecare has been able to keep
under review the two scenarios considered then. A number of the assumptions made have become
more certain. For example the wage subsidy claim has been fully approved by the Ministry of
Social Development, and Metlifecare has additional clarity from now knowing the length of the
7
Level 4 lockdown (confirmed at the 5 weeks modelled) and more accurate assessment of the
length of the likely pathway from level 3 to level 2 (two to four weeks).
Based on recent scenario analysis, and additional information including that mentioned above,
Metlifecare’s current consolidated underlying profit expectations for FY20 are from $83 million to
$90 million.
Metlifecare is in the process of preparing its village expense budgets for FY21 (consistent with the
timing last year), and is just starting work on development and resale/new sale budgets.
Metlifecare has not undertaken any FY21 internal forecasting to any degree of precision. It would
not ordinarily prepare internal forecasts for the next financial year, or update the bank model, until
after completion of the budget process. Metlifecare would not ordinarily have published any FY21
underlying profit outlook until, at the very earliest, the announcement of the half year result in
February 2021, or potentially even closer to the 30 June 2021 balance date. Similarly it has formed
no view on FY22 at this early stage.
The directors of Metlifecare are not aware of any other listed company with a 30 June balance
date that has developed a reliable FY21 forecast at this very early stage of the year. Accordingly,
there is no basis to determine that the lockdown in April 2020 would have impacted an FY21 or
FY22 forecast by more than 10%.
MAC exceptions apply
To the extent there may have been a reduction in Metlifecare’s consolidated net tangible assets or
its reasonably expected consolidated underlying net profit, this is the result of changes in general
economic conditions or changes in law.
The SIA’s exclusion of circumstances resulting from changes in general economic conditions is a
well-understood means of allocating general market risk to the Bidder. As you highlight yourselves
in your notice, the change in circumstances is being experienced across the economy in New
Zealand and globally; it is the very definition of a general economic condition rather than a
business-specific one.
Further, the level 4 lockdown restrictions impacting the operation of our business and most other
businesses in New Zealand result from changes in law. These changes have been implemented
through a number of new legislative instruments including the section 70(1)(f) Health Act Order
made on 3 April 2020 (as amended on 22 April 2020), the section 70(1)(m) Health Act Order made
on 25 March 2020, and the COVID-19 Response (Urgent Management Measures) Legislation Act
2020.
There is no basis to suggest that these changes in general economic conditions and changes in
law have had a materially disproportionate effect on Metlifecare. On the contrary, Metlifecare is
faring well relative to other NZX50 listed companies for example, including because we provide an
essential service and have continued to operate during the lockdown. The available data and
analysis show that Metlifecare’s total shareholder returns sit within the interquartile range of all
NZX50 constituents over the period 19 November 2019 to 22 April 2020.10
10 See Annexure B.
8
No Prescribed Occurrence
There is no breach of clauses 9.2 and 9.3 of the SIA.
We have sent you numerous detailed communications recently on the various issues you have
raised. To summarise:
None of our immediate and practical responses to the Government-mandated lockdown have resulted in a significant change to the nature and scale of our business, and nor have they involved any business or undertaking in which we were not previously engaged. Our business remains a going concern and we have not substantially changed its manner. Clause 9.2 is not breached by our responses to the lockdown.
Our construction, remediation and refurbishment & maintenance capex spending has been delayed to some extent by the Government-mandated lockdown. Those delays were required by the lockdown laws so cannot constitute any breach (by operation of clause 9.3(c)). We had an obligation to inform you of those. We have done so. We are now in the process of keeping you informed of the steps being taken to re-start those projects. We will continue to take into account any feedback you have. Clause 9.2(d) is not breached by these delays.
Leaving the lockdown interruptions aside, we have sought to formalise our understanding that you were always comfortable with our development programme, involving as it does some variation to an earlier capex budget. Those variations arise from various reasons as we have set out for you, but in each case born out of a desire to ensure that the projects are undertaken in the best possible manner for the business. We have over time provided you with all the development committee and board papers and minutes in a timely manner and in all cases in accordance with the time frames required by the SIA, and have discussed these matters with you on several occasions. There is no basis for you to reasonably withhold consent, and indeed we consider you to have consented to our programme, so there is no breach of clause 9.2(d).
In any event, none of the matters that have been the subject of the recent detailed
communications are sufficiently material, to the group as a whole, to justify termination, even if
there had been any breach in respect of any of them.
Yours faithfully
Kim Ellis
Chair
Metlifecare Limited
9
Annexure A: Share price
10
Annexure B: NZX50
11
Annexure C: Year on year revenues
Excluding Palmerston North ($m) YTD Mar 20 YTD Mar 19 Difference
Care revenue 21.1 17.9 3.2
Village and Service Fees 31.5 31.1 0.4
Accrued DMF 44.2 41.2 3.0
Cash DMF 22.2 20.4 1.8
Cash DMF (adjusted for timing) 23.2 19.0 4.2
Realised Resale Gain (adjusted for timing) 45.2 45.0 0.2
Cash receipts from the resale of ORAs 144.5 140.4 4.1
Cash receipts from the sales of new ORAS 60.4 51.1 9.3
A
ASIA PACIFIC VILLAGE GROUP LIMITED
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By email Private and confidential
Metlifecare Limited Level 4 20 Kent Street Newmarket Auckland 1023 New Zealand
Attention Andrew Peskett, Company Secretary
Copy to:
Chapman Tripp Level 38 23 Albert Street Auckland Central Auckland 1010 New Zealand
Attention Roger Wallis
27 April 2020
Dear Andrew and Roger
NOTICE OF TERMINATION OF SCHEME IMPLEMENTATION AGREEMENT
We refer to the Scheme Implementation Agreement between Metlifecare Limited (Metlifecare) and Asia Pacific Village Group Limited (APVG) dated 29 December 2019 (the SIA).
We acknowledge that the Metlifecare team has put considerable effort into the deal contemplated by the SIA. Our team has similarly applied itself to achieving a positive outcome, this having been the shared goal of both parties. However, the realities of the COVID-19 pandemic and its consequences are such that, in APVG’s view, it is no longer appropriate to continue with the scheme.
APVG has carefully analysed the position with its expert advisers. APVG has concluded that a Material Adverse Change has occurred, and also a Prescribed Occurrence, as defined in the SIA, and that APVG is entitled to exercise the contractual exit rights that allow for termination in such cases and that APVG ought to exercise those rights.
Accordingly, and in accordance with clause 14.3(c) of the SIA, APVG hereby gives notice to Metlifecare that APVG terminates the SIA under clauses 14.1(c) and 14.1(d) with immediate effect.
The reasons for the termination reflect APVG’s notice of intention to terminate the SIA given to Metlifecare dated 7 April 2020 (the Notice of Intention), namely:
(a) Material Adverse Change: The emergence and spread of COVID-19 is a Specified Event that has caused, or is reasonably likely to cause, reductions in the value of Metlifecare’s net tangible assets and consolidated underlying net profits in excess of the thresholds identified in the Material Adverse Change (MAC) clause. Each of these reductions entitles APVG to terminate the SIA;
(b) Prescribed Occurrences: Metlifecare has breached the interim period restrictions by deferring development, remediation, maintenance, and refurbishment projects outside of the parameters of the SIA without APVG’s consent. APVG is also concerned that Metlifecare has, without
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approval and in breach of the SIA, applied for and taken a wage subsidy in respect of entities that are not reasonably likely to be entitled to the wage subsidy, which is a material arrangement that creates reputational and repayment risks for Metlifecare. Those unauthorised actions are material to Metlifecare and entitle APVG to terminate the SIA.
APVG has considered all information available since the Notice of Intention, including Metlifecare’s reply dated 23 April 2020. For the reasons set out in this letter, APVG does not consider that Metlifecare’s factual or legal assertions are correct. To the contrary, the information provided during the past fortnight further confirms APVG’s concerns and the existence of circumstances entitling APVG to terminate the SIA.
APVG considers that the circumstances of the Material Adverse Change and the Prescribed Occurrences continue to exist and, accordingly, APVG now exercises its right to terminate the SIA.
Capitalised terms used but not defined in this notice have the same meaning given to them in the SIA. Our references to Metlifecare include its Related Entities.
Material Adverse Change (“MAC”)
Overview
It is apparent from Metlifecare’s reply dated 23 April 2020 that you have a different interpretation of the MAC clause than us, and a different view of the data than us, so we will step through the key elements to explain why we consider it has been triggered and why your interpretation is incorrect.
The SIA is conditional on a MAC having not occurred and permits APVG to terminate in the event of a MAC. These are important provisions that protect APVG as the Bidder from the risk of unexpected events that materially impact on the business of the Target. We address the detail below, but to summarise the essential elements relevant to this notice, the MAC is:
• any matter, event, condition or change in circumstances which occurs;
• which reduces, or is reasonably likely to reduce, the Target Group’s net tangible assets by $100 million or more or its consolidated underlying net profit in any financial year by 10% or more;
provided that the event, condition, matter, or change in circumstance is not the result of a change in general economic conditions or law (but these exceptions only apply if such matter does not have a disproportionate effect on the Target Group).
Specified Event
The emergence and spread of the novel coronavirus (COVID-19) pandemic in New Zealand is a “Specified Event” for the purposes of the definition of “Material Adverse Change” in the SIA. It has had and will continue to have impacts on New Zealand society and business, including Metlifecare’s business. Those effects are likely to continue for a considerable period of time, likely until a vaccine is available.
In particular, COVID-19 has had, and is reasonably likely to have, the effects on Metlifecare’s consolidated net tangible assets (NTA) and consolidated underlying net profit outlined below.
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Reduction in NTA
Metlifecare’s consolidated NTA at 31 December 2019 was reported at $1.49 billion.
As you know, during due diligence, we were provided extensive data regarding CBRE’s NTA valuation, so we have a good foundational knowledge of the valuation approach. We have considered this and the likely impacts of the pandemic. We have also instructed two separate valuation firms to undertake an assessment of Metlifecare’s NTA based on the 25 villages in the Metlifecare portfolio.
APVG concludes that the impact of the COVID-19 pandemic on Metlifecare’s NTA is a reduction of over $200 million based on long-term 25 year cashflows.
There is, additionally, considerable information and independent forecasting suggesting that COVID-19 will have an impact on Metlifecare’s NTA (and that of other operators). For example:
(a) The four main retail banks expect GDP growth to be negative in the year to March 2021, and do not expect the economy to get back to where it was before COVID-19 until at least mid-late 2021 in the case of the most optimistic forecasts (from Westpac), and as late as March 2023 (ASB). The four main banks also forecast residential house prices to decline significantly, with forecasts for the year to March 2021 ranging from a fall of 6% (Westpac) to 13% (ANZ). ASB also considers that prices will “flatline” into 2021 and forecasts by ANZ to September 2021 show prices falling on an annual basis.
(b) CBRE stated in a 25 March 2020 Research Paper (“COVID-19: New Zealand Economic and Property Market Update”) that COVID-19 will have potentially “severe impairments to assets with high levels of social interaction / densification, particularly in hotel, senior housing, traditional retail and shopping malls, co working office, etc” (p 29) and net operating income will fall faster in asset classes that have fixed costs/operating risks and/or are most exposed to this specific cycle “as well as those that are sensitive (e.g., retirement, healthcare)” (p 30).
(c) In a 14 April report on the economic impacts of COVID-19, Treasury stated “the COVID-19 pandemic is a ‘once in a century’ public health shock that is also having a profound impact on economic and financial systems around the world and in New Zealand”. (The concern is consistent with comments by the Director of the International Monetary Fund that the impact of the COVID-19 crisis may lead to “the worst economic fallout since the Great Depression”.) Treasury’s report included a series of economic forecasts and scenarios outlining the likely effects of COVID-19 on New Zealand’s economy and property market. The least restrictive scenario showed a 13% decline in GDP in the year to March 2021.
(d) The Government’s revised guidance for the move to Level 3 (released on 26 April 2020) indicated few relevant changes from Level 4. While property settlements will be permitted, they are subject to significant restrictions, and “at risk people” (which includes elderly people) are encouraged to remain at home even under Level 2. Sales of units, and development work, continue to be affected, and will continue to be affected.
(e) The substantial decline in share prices of listed retirement village and aged care operators in New Zealand has persisted since APVG’s Notice of Intention. Broker analysts have predicted significant falls in sales and resales, increased costs, and material declines in profits and the value of NTA specifically.
In short, the occurrence of the COVID-19 pandemic in New Zealand has already reduced and is also reasonably likely to reduce Metlifecare’s consolidated NTA by well in excess of $100 million. These
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are not circumstances that have been (or could be) remedied within the requisite time period in the SIA (clause 14.3(b)).
Reduction in consolidated underlying profit
APVG has modelled the consolidated underlying profitability of Metlifecare’s business based on the available information, including actual and budgeted unit sales, and considered key assumptions regarding profitability (including unit resales, development sales, volumes, margins, spending, and cost savings) across a range of scenarios. APVG’s extensive work during due diligence, and subsequently, puts APVG in a good position to undertake this analysis.
APVG’s analysis indicates that Metlifecare will be materially adversely impacted by the COVID-19 pandemic in the financial years ending 30 June 2020, 2021, and 2022. The impact is reasonably likely to exceed the specified 10% threshold in FY20, despite the fact the financial year was well advanced by the time COVID-19 emerged and spread in New Zealand, in FY21 by a larger margin, and also in FY22. The FY21 underlying profit impact is based on well-documented FY21 operating and cash flow forecasts and operational KPIs provided by Metlifecare to APVG during the due diligence process and representations by Metlifecare to its financing banks, and to the Independent Adviser.
APVG concludes that the profit limb of the MAC is triggered by significant margins even using assumptions that it considers to be conservative and prone to understate the impact on profit. This includes the underlying drivers presented in the 31 March 2020 COVID-19 management paper, which outlines FY21 drivers in order to calculate the bank forecasts.
The magnitude of the adverse impact exceeds the materiality thresholds under the MAC clause even if doubtful assumptions are made in favour of Metlifecare’s profitability. If assumptions are made that are more consistent with what APVG considers more likely, the materiality thresholds in the MAC clause are exceeded by an even greater margin.
Resales and development sales
Metlifecare’s data continues to show a shortfall of resales and development sales of independent living units (ILUs) relative to budget for March and April 2020. Settlements in April are down on budget (only 10, including 4 of which are transfers, against a budget of 58). APVG considers that a MAC will occur even if Metlifecare achieves settlement of all unconditional contracts so the points in your 23 April letter do not change our view. We also note that cancellations/reneges can and do occur for unconditional contracts.
Metlifecare’s data continues to show a shortfall of applications for units relative to budget for March and April 2020.
• Metlifecare forecast 80 applications in March but received only 36. Metlifecare forecast 62 applications for April but has received only 5 applications to date.
• Most of the recent resident applications reflect discounts on previously expected ILU prices.
• APVG considers that prospective residents will defer consideration and purchases for a significant time as a result of COVID-19 and its consequences.
• APVG does not consider (as Metlifecare suggests) that there is a broader positive inference about future demand to be drawn from the fact that some unconditional purchasers brought forward
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their settlement dates to allow them to move into their new homes ahead of the lockdown being imposed.
• The profit limb of the MAC clause is also reasonably likely to be triggered in FY21 due to the flow-on impact of falling numbers of applications for future sales (as well as declining development activity and deferral of refurbishment). FY20 picks up only three months or so of these circumstances (late March-June), whereas FY21 will be fully impacted. Based on the analysis undertaken, the impact of COVID-19 is not reasonably likely to be a short-term “blip”.
Taking the above points together, the evidence suggests that there will be a material decline in resale volumes and margin in FY20, FY21 and FY22 as a result of COVID-19. That is reasonably likely to materially affect Metlifecare’s underlying profitability in each financial year beyond the specified 10%.
APVG has taken Metlifecare’s pipeline into consideration, as well as Metlifecare’s stated assumption sets, which APVG notes that Metlifecare’s Board is not prepared to adopt as a forecast.1
Metlifecare has not analysed FY21 or FY22
Metlifecare advised us on 23 April that it “has not undertaken any FY21 internal forecasting to any degree of precision” and that it “has formed no view on FY22 at this early stage”.
The absence of financial analysis by Metlifecare is surprising to APVG.2 Be that as it may, APVG’s view of a likely material reduction in underlying profit in FY21 is supported by broker analysts, including Forsyth Barr and Deutsche Bank.
• Forsyth Barr published a research note dated 22 April 2020, which stated among other things: “Our scenario is that new sales and resales are very modest, if not non-existent over the first six months post commencement of the Level 4 lockdown and we have assumed development activity remains stalled over this period as well.” Forsyth Barr has commensurately reduced their forecast for Metlifecare’s normalised profit for FY20 and FY21 by 19.9% and 28.7% respectively.
• Deutsche Bank published a research note dated 20 April 2020, which stated among other things: “We have taken a conservative view on settlements by end of June and estimate uNPAT of $83m (-8% YoY). Further, we expect uNPAT to decline significantly in FY21e to $60m, as the wider economic impacts of COVID (i.e. border closures that drive unemployment to at least 13.5% according to the Treasury bull case, and zero net migration) depress housing market activity, and as the Government's wage subsidy scheme will have expired. We acknowledge that our FY21e estimate may prove too conservative if MET cuts overhead aggressively.”
Exclusions in definition of ‘Material Adverse Change’ do not apply
We understand Metlifecare to contend that the exclusions for changes in general economic conditions and law apply. In doing so, Metlifecare characterises the Specified Event as the regulatory and economic response to the virus. This is an incorrect characterisation of the Specified Event. The Specified Event is the onset and spread of the virus. Restrictions on movement and economic
1 We also note that the assumption sets take into account one-off items, including the wage subsidy
which is not relevant in any event to the calculation under the MAC clause. 2 By contrast, last year, Metlifecare’s budgeting process began in January, and was well underway by
April, by which stage the board had received a draft. We have been surprised by how guarded Metlifecare has been regarding FY21 despite repeated requests from APVG.
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activity, including Government imposed lockdowns, are consequences. So too is the general economic decline that has ensued. Therefore these exclusions in the MAC clause do not apply.
It is noteworthy that restrictions on access to retirement villages, including by Metlifecare and other operators, began before Government restrictions were announced and, in the absence of Government restrictions on the wider community, would have been required to otherwise protect staff and residents and take appropriate safeguards against COVID-19.
Nor is the COVID-19 pandemic itself an excluded event under the MAC, as it might be in other contracts. Rather, it is an entitling event, allowing termination if it leads or is reasonably likely to lead to a reduction in net tangible asset values or net profit by the specified amounts.
In any case, and alternatively, the imposition of restrictions by Government relied upon by Metlifecare involves the exercise of existing and longstanding public health and emergency management powers in respect of a new virus, COVID-19. This is not a “change in law” within the meaning and purpose of limb (f) of the MAC clause. We also note, in any event, that Metlifecare has been disproportionately affected, as is evident for example from the increased operating costs in the sector, the effects on staff and residents, the disproportionately adverse effects on the share prices of listed retirement village operators, the impact of COVID19-related declines in property transactions, and the sector lobbying the Government for increased support.
Prescribed Occurrences
Overview
The SIA prescribes detailed restrictions on the conduct of Metlifecare’s business during the interim period. Metlifecare must operate its business within those parameters (defined by reference to the ordinary course of business and the manner in which the business has been operated during 12 months prior to the SIA, restrictions on entering into material arrangements, and certain financial parameters), subject to particular exceptions including APVG’s consent. These provisions are important to protect APVG’s interests as Bidder. APVG is entitled to terminate if Metlifecare breaches the restrictions in clause 9.2 and the effect is material to the Target Group as a whole.
APVG believes Metlifecare has materially breached the restrictions and continues to do so despite the concerns that we have raised. APVG is entitled to terminate the SIA for such matters, and now does so.
Deferral of development, remediation, maintenance, and refurbishment projects
Metlifecare is deferring development, remediation, maintenance, and refurbishment projects well outside of the legal restrictions associated with the level 4 lockdown.
Activity that was to occur prior to the end of June 2020 is being pushed into the next financial year, and 2021 activity is being pushed into 2022.
Such deferrals beyond the lockdown restrictions themselves and incidental remobilisation time3 are not necessary to comply with any law and, therefore, could only occur with APVG’s consent. They appear instead to be intended to reduce and delay spending. They appear to be measures contemplated within Metlifecare’s announcement of 26 March 2020 stating it was “in the process of
3 Construction work can resume under level 3 subject to safety considerations. We do not consider that
the deferral of activity through May and June 2020 is a reasonable remobilisation timeframe.
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implementing a range of interim cost-saving measures”. In response to APVG’s request for an explanation, Metlifecare disclosed documents indicating sweeping cost savings including the deferral of development, remediation, maintenance, and refurbishment projects.4 The Board papers disclosed on 26 April 2020 show approximately $34.6 million of capex deferral from FY20 into FY21. That is more than 25% of forecast FY20 capex. Only some of that could be attributable to the level 4 lockdown period. APVG finds it difficult to reconcile these cost deferral strategies with what Metlifecare has said regarding future profitability. What Metlifecare has disclosed to APVG breaches the parameters in clause 9.2 of the SIA by a considerable margin.5
In five instances, Metlifecare acknowledged as much and requested consent.6 For those projects, Metlifecare failed, despite requests, to provide sufficient information and explanations to justify such proposals (which we summarise in Schedule 1). Metlifecare made information available by degrees, failed to discuss or consult on the overall financial impact of future years with the involvement of APVG, and such information did not support the requested consents.
For those projects, Metlifecare also incorrectly asserted that APVG had given consent. APVG rebutted such assertions and required explanations. Metlifecare did not provide those, and APVG considers that the assertions are without merit. In any event, consent under clause 9.3(a) of the SIA must be in writing and it was not (there was no consent at all).
Metlifecare belatedly argued that consents for those projects were required urgently and would be unreasonably withheld if not provided almost immediately (within 48 and later 72 hours). APVG considers there was no urgency, that necessary information had not been provided, and that in many instances the requests for consent were retrospective for decisions and steps already taken by Metlifecare. It responded accordingly.
For the balance of projects, Metlifecare has asserted that deferrals have been to comply with the level 4 lockdown, but this cannot be correct to the extent the programme of work does not resume promptly after the level 4 lockdown.
These matters give rise to a number of breaches of clause 9.2 of the SIA. They are material to Metlifecare because they:
• relate to development, remediation, and refurbishment projects that have been highlighted by Metlifecare as key areas of future profit generation;
• will have material consequential effects on the availability of independent living units and aged care facilities within Metlifecare’s portfolio of retirement villages;
4 Attachments to Richard Thomson’s emails of 3 April 2020 and 16 April 2020. We also note that the
version of management’s wage subsidy memorandum prior to the application being made on 3 April states: “In addition, management has activated the business continuity plan and undergone a significant exercise of identifying cost saving initiatives. This includes putting as much discretionary spend on hold during the lockdown period and beyond including consultants costs, development activities, village maintenance, refurbishment and remediation programme to the extent possible.”
5 Documents attached to Richard Thomson’s 16 April 2020 email, being the PDF titled “Metlifecare Cost Reductions 16 April 2020”, the PDF titled “COVID 19 Wage Subsidy Documentation March 2020” and the Excel spreadsheet titled “4Q20 Assumed Settlements (as of 14 April 20)”.
6 Pohutukawa Landing, Gulf Rise, Palmerston North, Dannemora Gardens, and Hibiscus Coast.
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• will have flow-on effects on Metlifecare’s financial position and performance including on consolidated underlying net profits in current and/or future financial years;
• will mean increased costs and reduced future development margin for Metlifecare; and
• the amounts in issue substantially exceed the parameters in the SIA.7
o Metlifecare is deferring construction capex in the order of $34.6 million in FY20, relative to a threshold in the SIA of $5 million or 5% of budget (whichever is the lesser).
o Metlifecare is deferring refurbishment capex in the order of $4 million and has reduced total refurbishment and maintenance capex by over $9 million in FY20 relative to a threshold in the SIA of $1.9 million or 5% of budget (whichever is the lesser).
o Metlifecare is deferring remediation capex in the order of $3.7 million in FY20 relative to a threshold of $1.9 million or 10% of budget (whichever is lesser).
o Metlifecare has provided information to APVG suggesting that it will also be deferring construction and remediation capex for FY21.
o For each category of work, the parties agreed particular thresholds because deviations were recognised as being material in the context of Metlifecare’s business.
Wage subsidy applications
On 3 April 2020, applications and supporting statutory declarations were made to apply for wage subsidies from the Government for 26 Metlifecare group companies, which have resulted in wage subsidies being received by those companies in the order of approximately $7.1m.
This is a material arrangement and, in order to make the application for each entity, it was necessary to make a statutory declaration of eligibility for the wage subsidy, including:
“your business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year, or a reasonably equivalent month for a business operating less than a year or a high growth business that has experienced a significant increase in revenue, and that revenue loss is attributable to the COVID-19 outbreak”
“before making your application for the subsidy, you have taken active steps to mitigate the impact of COVID-19 on your business activities (including but not limited to engaging with your bank, drawing on your cash reserves as appropriate, making an insurance claim)”
APVG does not consider that such a declaration could appropriately be made in respect of the companies within the Target Group entity that have not suffered, or will not suffer, a decline in actual or predicted revenue. These include the 11 entities operating aged care facilities.
• The aged care facilities are not expected to suffer a material decline in revenue. Their revenue is derived from occupancy fees, not property transactions.
• Metlifecare’s management paper regarding the application for the wage subsidy acknowledges “MET’s care operations are expected to remain largely unaffected during the lockdown period”
7 Clauses 9.2(a), 9.2(d)(iii)(C), 9.2(d)(iii)(D), 9.2(d)(iii)(E) of the SIA.
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and that Metlifecare may be perceived as an “unintended recipient” of this particular support as a result of this.
• During a conference call on 1 April 2020, Metlifecare’s Chief Financial Officer, Richard Thomson indicated that Metlifecare was unlikely to draw the whole amount based on its discussions with PWC but Mr Ellis stated that Metlifecare could pay the Government back later if need be.
APVG also does not consider that such a declaration could have been made in respect of the steps taken to mitigate the impact of COVID-19.
Based on its reply on the evening of 23 April 2020, Metlifecare appears to accept, as it must, that these applications were made without APVG’s consent, which is a material breach of the SIA.
If, as APVG believes, the applications should not have been made in respect of a number of companies in the Target Group, the implications are material. They include obligations to repay the wage subsidies, reputational harm, and potential liabilities (as Metlifecare’s management paper on the wage subsidy acknowledges). (Recent press reports indicate a number of companies have either proactively reimbursed the wage subsidy or been asked to do so following Government investigations.8 Public and Governmental attention is focused on unintended recipients of the wage subsidy under what was designed to be a high trust system.) The purported recognition of the wage subsidy as profit in Metlifecare’s projection that was announced to market adds to those concerns.
Therefore, APVG considers that Metlifecare has materially breached clauses 9.2(c)(ii), 9.2(d)(xi) and 9.2(d)(x)(C) of the SIA in respect of the wage subsidy applications. Those breaches are material to the Target Group as a whole because provision ought to be made for repayment, and there are reputational consequences, adverse relationship effects with the Government and other stakeholders, and other consequences of the application.
Over the last five weeks or so, APVG has made a number of requests for material information about the business and the decisions taken by Metlifecare in respect of it that have not yet been responded to or where APVG does not have full confidence in the information and explanations received. It may be that additional Prescribed Occurrences have occurred.
8 See for example https://www.stuff.co.nz/business/121215598/coronavirus-more-than-16-million-in-
wage-subsidy-to-be-refunded-after-government-audit
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APVG reserves all of its rights and remedies under the SIA and at law.
Yours faithfully,
Nathalie Brabers-Jastrow Director By and on behalf of Asia Pacific Village Group Limited
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SUMMARY OF INFORMATION REQUESTS MADE BY APVG TO METLIFECARE
1. 20 March (Sam Franklin to Richard Thomson)
(a) Updates on each 'level' of the 'sales funnel' as per the monthly board packs (i.e. active leads in database, hot leads applications YTD, cancellations, new applications, settlements). Requested the raw data and dashboards on a daily basis.
(b) A call with Sandra King and the sales and marketing team over the next day or so to discuss what they're seeing.
(c) Latest cashflow sensitivities model
(d) Latest version of the bank/covenant model (the same one we received during the diligence process)
(e) RFP response documentation and the diligence undertaken in relation to the potential acquisition of the Caughey Preston site in Remuera.
(f) Breakdown of the operating expenditure and capital expenditure reductions and delays, and any raw data used to quantify these initiatives.
(g) Any potential delays of any development projects, and the analysis of the potential savings from doing so. Any analysis on the longer term impacts of delaying those projects? (completion / sales date).
2. 26 March (Sam Franklin to Richard Thomson)
(a) Follow-up on requests of 20 March.
(b) “Daily pipeline updates mentioned on Tuesday [24 March]”. Requested to “…see the numbers as soon as [MET] are seeing them now”. “Don’t need any special preparation, we are happy to just get the raw data”.
3. 26 March (Ken Wong to Kim Ellis)
(a) All information setting out the scenario planning that Metlifecare has undertaken for FY20 and FY21, including across both periods:
(i) details of the scenarios that the company has assessed, including in light of the most recent company announcement;
(ii) revenue, expense and cashflow analyses for each of the scenarios (inclusive of any restructuring and retrenchment costs that will necessitated in any scenario);
(iii) underlying profit in each scenario;
(iv) the position of the company’s compliance (or not) with its debt facility covenants in each scenario;
(v) Any information regarding the impact of each scenario on the existing property valuations that make up the current balance sheet asset position; and
(vi) Any revised budgeting that has been undertaken by the company.
(b) The amount of spend that will be suspended, reduced or cancelled, for how long, and potential implications of doing so, including:
(i) restricting discretionary spending;
(ii) deferring or halting projects;
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(iii) instigating a hiring freeze;
(iv) $10 million of planned operational and capital expenditure.
(c) To the extent not covered above or already provided by Metlifecare to APVG, the information requested by APVG on 20 March 2020 (a copy of the relevant information request was attached).
(d) All papers, information or analysis that has been provided to the Board to date (whether it relates to COVID-19 or not) and any associated minutes, including the full February 2020 Board pack.
(e) All information provided to the Board is provided at the same time to APVG.
(f) A standing call is set up with Kim, Glen and Richard every second day now in order to keep APVG informed of material developments in relation to Metlifecare – again, in real time.
4. 28 March (Ken Wong to Kim Ellis)
(a) Raw data from the CRM in relation to settlements pipeline, including information around applications and cancellations at each level of the settlements pipeline. Please provide this on a daily basis (i.e. the same ones that management circulate internally on a daily basis).
(i) Requested the settlement value for newly settled units, resale margin dollar value generated from settlements, sales price above MSP and any other incentives or inducements offered to residents who have settled that vary from standard contract terms (or terms that had been previously agreed). Please detail any discounting that may be occurring that is outside of the ordinary course of business.
(ii) Requested management's expected number of settled resales & development units for March, April, May and June.
(b) Cash flow sensitivities and underlying model analysis of scenarios that the management team and Board have assessed, in particular the sensitivities which have underpinned the decision to defer capex and draw down on the Company's core facility.
(c) Covenant analysis based on management scenarios from bank model.
(d) Underlying analysis around decisions to defer opex and capex projects provided to APVG on the 23 March including analysis around likely future impact of these delays (e.g. completion timing of developments, valuation implications of reducing refurbishment and remediation).
(e) Analysis of impacts of further deferrals which have been undertaken since 23 March
(f) Full February board papers.
(g) All papers, information and analysis provided to the Board, Sub-Committee or any Director going forward is provided to us at the same time.
(h) Times to start the regular catch up calls that APVG previously requested as the rapidly evolving situation warrants close monitoring, with these calls to start from Monday 30 March 2020.
5. 26 March (Ken Wong to Glen Sowry)
(a) In relation to Glen’s email of 27 March - request the bottom-up data that will give us a reasonable understanding of where the business is currently at, what the outlook for it is and the consequences of the consents being sought. The necessary information has been requested and have also followed up with Kim in a separate email. Need to get into the detail with you, from the raw data up, and again request the relevant underlying information as soon as possible.
(b) Requested calls every two days to ensure APVG can get up the curve quickly and monitor the position as needed, aiming for the first call on Monday.
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(c) Further detail on MET’s plans as opposed to the high-level summary email that has been provided. For example, further detail on the changes to the remediation, refurbishment and maintenance capex. Requested on an urgent basis.
(d) In respect of SIA consents, MET identify:
(i) Each MET action or proposal in respect of which APVG’s consent is sought under the SIA by reference to the relevant clause in SIA;
(ii) What actions or proposals MET has already taken and what action/proposals it is now considering taking, which are prohibited under clause 9.2 (by reference to the particular provisions of clause 9.2); and
(iii) Which of those actions/proposals it believes it is entitled to take under clause 9.3 (identifying the relevant ground).
6. 31 March (Ken Wong to Kim Ellis and Glen Sowry)
(a) Data and assumptions previously requested (in respect of deferral of sales, construction, remediation etc.).
(b) The full raw data set from within the business regardless of whether it has been produced for the "exec level". See 20 March request
(c) If MET is seeking APVG’s consent to any actions, APVG needs to understand this, together with being provided with all relevant financial information for such proposals, in order to enter into any discussions if that is what MET is requesting. APVG to be provided with information at the same time it has been provided to the Board.
7. 7 April (Ken Wong to Richard Thomson, Glen Sowry, Kim Ellis)
(a) The advice received by MET from PwC in relation to MET’s ability to make a claim under the NZ Government Wage Subsidy.
(b) Based on PwC’s advice, an overview of the potential risks from making the claim.
(c) If MET has decided to make a subsidy claim(s), copies of the application made by MET for such subsidy, including all supporting information provided to the NZ Government, including any forecast information.
(d) In relation to requests for consent under 9.2 of the SIA, APVG requires information and MET’s view on permissions needed in order to assess and respond. The starting point is that MET should undertake this work, give APVG the information on a specific, per item basis and let us have the opportunity to consider it in a reasonable way and respond. Reiterated APVG’s request for MET to do this as soon as possible, which was previously flagged in discussions with MET.
8. 8 April (Ken Wong to Kim Ellis)
(a) Reiterated request for all outstanding information to date and provided a summary of earlier requests.
9. 14 April (Sam Franklin to Richard Thomson)
(a) The original version of the MET management memorandum regarding the wage subsidy from 31 March 2020.
(b) Any documents, notes or emails to or from anyone in the MET team in relation to PwC’s call regarding the wage subsidy scheme.
(c) Copies of any financial information about MET or its future position (or other relevant materials) provided to the Board for the board meeting at 5pm on 8 April 2020.
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10. 14 April (Ken Wong to Kim Ellis)
(a) Raw data regarding sales data, (hot leads applications, YTD, cancellations, new applications, settlements) in the form of the native documents produced by the management team.
(b) For development and refurbishment capex, whether for each delayed project there have been instructions to the contractor or claims/notices from the contractor (e.g. suspension instructions, variation claims, or variation orders for the stop to the works). If contractors have given or received notices under the construction contracts, that is relevant to analysis of deferral/delay.
(c) Details of any incentives or inducements offered to residents that vary from standard contract terms (or terms that had previously been agreed).
11. 17 April (Ken Wong to Richard Thomson)
(a) MET’s intention is for frontline staff hourly rates during Level 3 and whether increased hourly rates for frontline staff will be continued.
(b) Whether the costs for personal protective equipment are expected to be ~$100,000 and the costs for security at the villages and food ordering and delivery systems expected to be ~$140,000 for a four week lockdown period.
(c) MET’s latest forecasted STI Cash Flow Target and documents relied upon by Metlifecare to draw the conclusion that MET is not expected to meet the gateway in order for staff to be eligible for an STI in FY20.
(d) MET’s STI Participant’s Guide and the Policy and whether Metlifecare’s Board or any Sub-Committee of the Board has given discretionary consideration to review the targets for the STI in accordance with the rules in the Policy or the Guide. If so, please provide any documents relating to that assessment.
(e) 31 March version of the management wage subsidy memo.
12. 19 April (Ken Wong to Richard Thomson)
(a) Any correspondence between MET and its lenders.
(b) Relevant documents and detailed explanations in respect of the status of, suspension and deferral, and implications thereof for the Fairway Gardens, Pohutakawa Landings, Orion Point, Gulf Rise, Edgewater, Oakridge, Palmerston North, Dannemora Gardens, Greenwood Park, Coastal Villas, repairs and maintenance projects, long term maintenance projects, refurbishment projects.
13. 20 April (Ken Wong to Richard Thomson)
(a) An explanation of the basis upon which each Metlifecare village subsidiary company substantiated a 30% reduction in revenue, as required under the terms of the Wage Subsidy Scheme on the basis that Metlifecare’s own internal documents acknowledge that the companies operating the aged care facilities have not suffered, and will not suffer, a 30% decline in revenue.