A discussion point on use of franking credits.I don't believe...

A discussion point on use of franking credits.

I don't believe HGO would consider at this stage paying out sufficient cash dividends to fully utilise franking credits - around $49m or 8.2cps. However with the looming possibility of a Labor Government it would be sad to lose the franking credits.

However what if HGO paid such a dividend and then had a rights issue (1 for 1) at say 6cps. this would represent a net cash payout of 2.2 cps with franking credits of 3.5 cps. A bonanza for tax free shareholders, useful for a company with tax losses (unfranked dividends could become franked dividends) and not too bad for others except individuals with tax rates higher than 30%.

There would be some conditions including the fact that dividends must be paid out of profits (earned up to the dividend declaration) and the new issue would need to be underwritten to ensure HGO remains a going concern. Clearly there would be some administration costs as well.

Any thoughts?