Viaduct hikes deposit rates as it goes 'naked' post guarantee (update 2)
28th Apr 09, 12:02pm
Viaduct Capital announced on Tuesday morning that it had amended its prospectus and raised interest rates for deposits following the withdrawal of its Crown Guarantee by Treasury last week. (Update 2 includes further comments from Viaduct's Nick Wevers.) Viaduct owner Nick Wevers said that he was "surprised" at Treasury's decision to take the government guarantee away from the company. However, the guarantee would still cover all deposits made before April 20, Treasury said. "We believe the Crown Guarantee was only a temporary measure to support the finance industry through a difficult phase," Wevers said in a statement. "The company is now pleased to reflect the cost of the guarantee by offering investors what it considers to be more competitive interest rates," Wevers said. Viaduct more than doubled its one year deposit rate from 5% to 10.25%, raised its 18 month rate to 10.45%, and put up longer term rates to 10%. Treasury said it had withdrawn the guarantee because it thought "the business or affairs of Viaduct are being, or are intended or likely to be, carried on in a manner which: may extend the effective benefit of the Crown Guarantee to persons who are not intended to receive that benefit; and is otherwise inconsistent with the intentions of the Crown in entering into the Guarantee." Wevers said Viaduct believed "a part of the reason Treasury withdrew the Guarantee was because it didn't like the idea of a small finance company becoming a large one using the guarantee to do so." "Furthermore, we think Treasury has misunderstood our business model," Wevers said. Treasury said it would not respond to Wever's comments because of commercial and legal considerations. Wevers said that Viaduct was focussed on lending "secured over property and to businesses seeking to improve their cash flow." "Property lending is in the form of either purchasing existing loans from other lenders at a discount, new loans over assets at current market valuations or loans where the company can enjoy an enhanced security decision," Wevers said. "Market sentiment is changing. We see excellent business opportunities now current market conditions reflect the readjustment of asset values," he said. Formerly Priority Finance, the company was renamed Viaduct Capital when it was bought by ex Blue Chip CEO Wevers in February. It initially offered a prospectus to raise NZ$50 million from the public. Treasury not entering into discussions Wevers said that Viaduct had sought further answers from Treasury on why they had decided to withdraw the guarantee. "We received a written reply but no meeting is forthcoming," he said. "Quite honestly it did not give us everything we needed," he said, adding "they are not entering into discussions, their decision has been made." "At the end of the day we formed our own views on why they decided to withdraw," he said. On the type of lending Viaduct was focusing on, Wevers said that the company was not focusing on property development and that they were focusing on property that they can see a clear exit from. Business lending was to small and medium sized businesses. "Banks have contracted lending, that's providing us with a lot more opportunities," Wevers said. On purchasing loans from other lenders, Wevers said that although they had not yet begun purchases, they would be "seeking to acquire from other lenders loans they are looking to sell as a process of liquidating their books." He said he could not disclose which lenders Viaduct would be looking at.