Salient. Official Newspaper of the Victoria University Students' Association. Vol 44 No. 9. May 4 1981
Student Travel Bureau — The Prospect for a Solution
Student Travel Bureau
The Prospect for a Solution
As expected, the Special General Meeting of the New Zealand University Students Association held last Sunday 3 May did not produce any final solution to the financial problems faced by its company, Student Travel Bureau Ltd.
However, a parcel of motions passed at the seven hour meeting in VUWSA's Union Hall looks likely to produce a brand new company by the 25th of this month — Student Travel Bureau (1981) Ltd — owned by at least two students associations (Victoria and Otago). Failing this, NZUSA will immediately discuss the future of the current STB; a move which will possibly see STB cease to trade.
Attended by delegates from the seven constituent student associations, NZUSA national officers, the directors of Student Travel Bureau, and no less than three association lawyers — the first half of the SGM was taken up with discussion of the proposal created by Victoria's lawyer, Heughan Rennie.
Rennie introduced the proposal as "a device" which provides constituents with a chance to pay as little as possible; and a formula acceptable to all seven, including those taking a non-financial role in the new venture. His system allows the services currently provided by STB to students to continue, and the repayment of all debts at the end of a five year period.
Although the lawyer took almost an hour to explain what has now affectionately been dubbed "The Rennie Proposal", it can be outlined as follows.
The Rennie Proposal
A new company would be formed ("Student Travel Bureau (1981) Ltd") with a paid up capital of $50,000. Rennie purposely made no mention of who would be the new company's shareholders. The new company would purchase all the assets — except the International Student Identity Card (ISIC) — from the old STB for $20,000. NZUSA would immediately pay its debt to the current STB — quoted by Rennie as $66,000; more on this later.
Currently STB has a long standing debt to the Australian Union of Students Travel Service (AUSTS) quoted as about $70,000. Under the Rennie Proposal, the new STI would immediately negotiate with AUSTS to eliminate this debt.
The new company would also be in a position to reduce its $130,000 overdraft with the Bank of New Zealand to apprximately $95,000 — which happens to also be the level of the overdraft guarantees held by the BNZ from four students associations ($40,000 in Victoria's case). Even more negotiations would be held with the BNZ regarding eventual repayment of this $95,000.
Lastly, the new company would arrange to hold the agency to sell the 1SIC, and pay the old company a royalty on each card sold. Being the backbone of STB's operation, this royalty would provide the capital year by year to repay debts. However, this aspect is dependent on successful negotiation for a price increase in the ISIC of an amount equivalent to the royalty.
Comparison with other Proposals
While this may all seem somewhat confusing, we can summarise by saying the Rennie Proposal represented a total cost of approximately $116,000 — $66,000 from NZUSA (again, more of this later), and $50,000 from whoever the shareholders may be (worth noting this is not necessarily all student money).
Compared with the estimated costs of $160,000 for injecting new share capital, and at least $200,000 to wind up STB (both discussed in the article above) — the Rennie Proposal is clearly the cheapest. This fact prompted STB chairman Steve Underwood to dub it "The Woolworth's Proposal".
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The scene at Sunday's meeting.
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The STB Board of Directors, from left: Phil Chronican, Stephen Underwood, David Cuthbert.
But not only is it the cheapest, Victoria's proposal would mean that any student shareholders in the new STB would have their money in a company with real value. In addition, the venture would hopefully mean the elimination of all debts after a five year period.
While all this sounds rather sweet, Rennie was very careful to point out the assumptions upon which this proposal was based. The primary one is that the new STB will trade at least at a breakeven point. We must first be convinced that students will continue to suppport STB; otherwise the proposal becomes, said Rennie, "a recipe for further loss." If, for example, Victoria buys shares in the new STB and it trades un-profitably, we will be worse off under this approach than any other.
Future Profits?
The question of STB's future profitability is somewhat difficult. Rennie's firm pointed out that, without interest repayments, STB had traded profitably from 1978 to 1981. When STB managing director David Cuthbert was asked at last Wednesday's VUWSA Exec for his opinion on the question, he was cautious. He claimed there would be great problems if NZUSA's constituents did anything to work against the company — particularly non-shareholding constituents.
In the "medium term future" Cuthbert sees the primary factor to be a price increase on the ISIC, without a substantial fall in numbers sold. He also pointed to the need to at least sustain trading levels in exchange travel schemes such as those to North America, and the possibility of negotiating additional benefits (discounts on various products) to ISIC holders.
Quite clearly, this question requires substantial investigation by any of the potential shareholders of the new STB.
Campus Reaction
SGM reaction to Victoria's proposal was that it was worth serious consideration. However, this contrasted sharply with the number of campuses willing to become involved financially. Auckland, Canterbury, Lincoln and Massey all have strong policy which would, at present, keep them out of such a venture.
Simon Mortlock, Canterbury's lawyer, claimed the proposal was "far superior to the proposal of STB's board" to inject new share capital (see above article). It would be fair to say STB's board agreed with this appraisal.
However, the suggestion also came from Canterbury that the cost of winding up STB was, in a strictly legal sense, far less than Victoria's proposal — a total of $130,000, contrasted with at least $200,000. This suggestion was rejected out of hand by other delegates, however. It would have meant regarding STB staff holiday pay and redundancy payments, for example, as any other debt — likely to be settled at 10 or 20 cents in the dollar. The suggestion was also unacceptable in the light of the re-affirmation by NZUSA, at an SGM earlier this month, that it would "meet the debts of Student Travel Bureau as at 30 May 1981."
Another pleasing aspect of the discussion was the sensible approach taken towards the proposal by campuses which were not interested in being financially involved themselves. Auckland's Bob Lack expressed his association's opposition to itself or NZUSA owning shares in the new company, but added that AUSA would not get in the way of other campuses which might.
In fact, the key motion of the meeting resulted from such an attitude. Moved by Canterbury and Waikato, and passed unanimously, was the motion: "That NZUSA authorise those constituents interested in the Rennie Proposal to enter into negotiations with the Bank and other creditors of STB, on their own behalf, with a view to the formation of a new student travel bureau."
Basically, this motion represented an endorsement of Victoria's proposal and, in effect, an undertaking on the part of all constituents not to unduly hinder the establishment of such a venture.
Three successful motions followed; the first giving the board of STB the power to unanimously decide to accept any such proposal; the second resolving to immediately decide the future of STB if a proposal was not forthcoming by 25 May (putting a time limit on the potential shareholders); and, in the event of it being needed, the President is to prepare a report to May Council on the costs and related effects of the cessation of trading of STB.
Settling the Debt
The next part of the SGM was taken up with discussion of the debt owed to STB by NZUSA. This is the debt quoted as $66,000 throughout the Rennie Proposal. However, a substantial part of the debt was still in dispute (a result of the misty financial relationships between NZUSA and STB From 1973 to 1975). Because settlement of the debt is a very necessary part of the proposal to form a new company, its exact level had to be fixed at this meeting.
An often heated discussion followed, with Victoria's delegates strongly urging the acceptance of a debt of $59,554 and recognition of an approximately $8,000 payment to NZUSA by STB late last year. However, this figure was not accepted by a narrow margin and a figure of $52,732 owed to STB by NZUSA was agreed upon (plus recognition of the $8,000 payment). The difference between the two figures is the payment of interest on an old debt of NZUSA to STB — NZUSA has always refused to recognise this interest debt.
While having the level of debt settled is an advance, the difference between the Victoria proposal's "$66,000" and the real $52,700 may well provide some hindrance to the new company's prospective settlement.
Finding the Money
The last part of the SGM was taken up with the proposals for NZUSA to find $52,700 with which to pay STB. It was resolved that this figure will be paid to STB from constituent levies income — after STB has negotiated with possible assets purchasers and the BNZ — for the interim.
However, NZUSA will investigate the possibility of financing this debt using its own asset of Student Union House (although it will not sell the building). In the event of such financing not being available, notice has been given for a special levy to be struck in 1981 of $1.35 per student. In Victoria's case, such a levy would cost close to $8,000.
At first sight Victoria students may consider our Association will be taking on a risky venture if it considers providing share capital for a new STB. However, even if this new company trades profitably for only a couple of years, the debt repayments which will occur during that time mean that to wind the company up after that would be a cheaper process than any other proposal before NZUSA at Sunday's SGM.
Once other campuses fully realise this, there is the possibility we will see them come to the party and take out shareholdings.
Stephen A'Court