By February 24, noteholders owning nearly $16.4 million worth of the $20.05 million notes on issue had opted to rollover to new five-year notes paying 6%, well below the 9.25% the notes currently earn.

The offer, originally due to close on February 24, was extended to March 10 because of mail disruptions caused by Christchurch's earthquake.

"We are seeing more acceptances daily," says chief executive Mark Thornton.

The price the shares will be offered at won't be known until the notes' March 15 maturity date. It will be set at 95% of the weighted average trading price during the 20 trading days before March 15.

NZF shares last traded at six cents and the current bid price is five cents. NZF's notice of meeting assumed a hypothetical 6.55 cents average share price and therefore assumed a maximum of 56.135 million new shares would need to be issued.

However, with the share price at six cents, 56.135 million shares are worth $3.368 million compared to the $3.677 million worth of notes which hadn't opted to be rolled over by February 24. At five cents, 56.135 million shares would be worth only $2.807 million. Which suggests 56.235 million shares might not be enough.

"Obviously, we cannot control the share price, but I would suggest that the main reason for the fall in the share price was driven by the unknown amount of share dilution (and) by a very small number of shareholders," Thornton says.

Now the maximum amount of dilution is known and actual dilution is likely to be less than the maximum, "maybe the share price will stabilise at the current price," he says.

The shares were trading at 14.5 cents before NZF announced it wouldn't be redeeming the notes for cash.

Thornton says NZF will only need shareholders to vote on whether to issue the new shares if they exceed 20% of NZF's current share capital - it has 76.7 million shares on issue.

If more than 15.5 million new shares need to be issued but shareholders vote against them being issued, "NZF could probably not meet the cash required but, given that only 50.01% is needed to approve the resolution, I do not see any problems," Thornton says.

At March 31 last year, directors owned 67.7% of NZF's shares.

NZF reported a $1.4 million net loss for the six months ended September when equity of just $12.8 million supported $268.8 million of total assets. Cash had dropped to $4.1million at September 30 from $15.3 million at March 31 last year.

NZF has been working to attract much-needed fresh equity since early last year. Thornton says discussions with a potential partner are continuing. "The effects of the Christchurch earthquake has to be understood in relation to our market which is predominantly in the greater Auckland region," he says.