As the company's value continued to slump, Ms Kinnaird said Forsyth Barr had calculated the maximum penalty for the company's withdrawing from the contract to roll-out the Government's prized UFB network was around $360 million, with a six-month step-in right for Crown Fibre Holdings and an accelerated repayment of debt.
''This would avoid up to $1 billion of capital spend, allow some dividends and justify a share price of $2.40 to $2.50.
The shares closed last night at $1.53. Chorus' long-term story had become more important as favourable Government intervention on
access to the company's copper wire network became less likely, Ms Kinnaird said.
''With no certainty on long-term copper revenues until the cost-based reviews of the unbundled copper local loop and unbundled bitstream access are complete, we do not believe dividends can be supported.
''With the reviews taking up to 24 months to complete, the intervening period will be dominated by uncertainty.''
Forsyth Barr could not see the Government providing support for Chorus through the process to allow it to continue with a dividend until the cost-based reviews were completed, she said.
Chorus must review all discretionary expenditure to protect as much shareholder value as possible.
If that were achieved, an equity-raIsing should be unnecessary until the cost-based reviews had been completed, Ms Kinnaird said.
Craigs Investment Partners broker Chris Timms said Chorus should suspend its dividend policy immediately and recycle the cashflow back to the company.
The Government only had two options: it could win the 2014 election in its own right and pass the required legislation, which was considered unlikely; or it could become a shareholder in Chorus, which would be politically unpalatable given the sell-down of state-owned assets.
Chorus faced a large capital-raising to finish the UFB project, which could be done through a rights issue. In a rights issue, existing shareholders were issued a right to purchase Chorus shares with no obligation to take them up.
''This is a good method to raise money but there would have to be a reasonable discount to appeal to shareholders.
''This is a lot more weight on the company's shoulders. Chorus is in a difficult position.''
