Two and a half years after ANZ put its NZ vehicle and asset finance provider UDC on the block there's no indication of an imminent sale

Two and a half years after ANZ put its NZ vehicle and asset finance provider UDC on the block there's no indication of an imminent sale

By David Hargreaves

ANZ says it has no further update on what if any progress it's making with the sale of its NZ vehicle and asset finance provider UDC Finance.

The sales process - which looked likely to be a fairly routine 'quick flick' when ANZ first launched it in early 2016 - has become protracted, agonising, and at times fairly embarrassing, for the bank.

In March of this year ANZ indicated it might seek to sell shares in UDC to the public through an IPO and list the company on the stock exchanges both here and in Australia.

However, there's been no recent update on that and if ANZ were to get an IPO up and running before the end of the year it would probably be pretty much having to announce it now - and yet there's no sign of any movement in that regard.

The other option of course remains a 'trade sale' with UDC being sold to a private buyer - but there's been no recent, even speculation, about this either.

The most recent suggestion of some potential buying interest was in the The Australian Financial Review's influential 'Street Talk' column, which regularly gets the inside word from investment bankers working on deals. It reported back in July that cash-rich Australian private equity firm BGH Capital was having a close look at UDC - but there's been no recent word on this. 

Heartland Bank, which has consistently expressed an interest in buying UDC, is this week asking shareholders for approval to restructure its business so that the Australian operation will operate as a sister business to the New Zealand bank and will no longer come under direct supervision from the Reserve Bank of New Zealand. The move's aimed at giving Heartland greater freedom with its Australian activities.

While such a move wouldn't appear to totally rule out Heartland buying UDC it would suggest the New Zealand company's is not counting on being successful with its interest and is looking elsewhere to grow profits. 

The now nearly two and a half years since ANZ publicly put the 'for sale' signs on UDC have been a time of big ups and downs for both the bank and its subsidiary.

A sale of course was announced, in January 2017 for $660 million to the then massively acquisitive Chinese aviation and investment conglomerate HNA Group. That sale blew apart late last year after the Overseas Investment Office had serious concerns about HNA and its debt levels, while the OIO was not even able to satisfy itself who owned the Chinese company.

Since then HNA has gone into complete reverse, with a massive multi-billion dollar sale of assets - which is still continuing - as it attempts to get rid of a crippling debt burden.

One of the companies HNA has sold as it struggles to right its ship is the business that was going to take UDC under its wing, TIP Trailer Services. 

It was announced in May that TIP Trailer Services was being bought by I Squared Capital, an independent global infrastructure investment manager. The deal was settled last month.

The company that TIP had set up in New Zealand to take over UDC, TIP-HNA New Zealand Holdings, was only actually removed from the Companies Office register in late July, even though the deal to buy UDC was officially called off in mid-January.

TIP executive Pawel Kucha, who earlier spent a year working with UDC on the separation of UDC from ANZ in preparation for TIP taking control had remained in Auckland for after the UDC deal collapsed, styled as Business Development Director for TIP, but his latest LinkedIn listing indicates he relocated to Canada for TIP earlier this month.

In the meantime, UDC has continued to go about its business quietly and profitably

The main issue for UDC with the protracted sale process has been the uncertainty that this has generated for would-be depositors.

UDC's previously dominant method of funding by offering secured investments to the public has declined, which has meant that the ANZ has needed to more directly fund growth of UDC's lending book.

UDC's recently released interim accounts for the period to March 31, 2018 show that in the latest six month period ANZ advanced a further net $232 million to UDC in order to grow the latter's loan book.

At the moment the terms of secured investments with UDC are, according to the current UDC disclosure statement, that UDC has the right (while owned by ANZ) to repay secured investors/debenture holders at any time. This was agreed to by debenture holders in expectation last year of the HNA deal proceeding - but it remains in place. This might appear to be some sort of obstacle for UDC currently attracting new funds from the public.

ANZ, as of its June disclosure statement, was still classifying UDC as "assets held for sale".

However, the good news for UDC is that the big drain on secured investments that occurred during the period it was under offer to HNA (with something like half a billion dollars withdrawn) has seemingly ended and the level of secured investments, according to the most recently available figures (March), has levelled out at around $1 billion.

See here for our previous articles on the UDC sale.

*This article was first published in our email for paying subscribers early on Tuesday morning. See here for more details and how to subscribe.

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I have always supported UDC with deposit funds but no longer do so. I would be happy if their Product Disclosure Statement guaranteed to offer a repayment or transfer to equivalent ANZ product in the event of a sale, however there is one sentence slotted in on page 12 stating "UDC is under no obligation to
exercise this right (to offer conversion or repayment) and you should not assume that we will do so" meaning my investment could be under the control of any unknown entity in the event of a sale and this is not acceptable.