UDC's loan facility from parent ANZ lifted by NZ$150 mln, won't participate in extended Crown guarantee

UDC's loan facility from parent ANZ lifted by NZ$150 mln, won't participate in extended Crown guarantee

UDC, the country's biggest finance company and a subsidiary of ANZ, says it has decided not to participate in the extended Crown retail deposit guarantee scheme.

(Update adds comments from UDC).

The company's decision is revealed in an amendment to its prospectus, dated September 30. The decision follows UDC chief executive Chris Cowell telling interest.co.nz 10 days earlier that the finance company was still considering whether it would apply for the extended guarantee, even though its parent ANZ wouldn't be applying and UDC has an AA credit rating from Standard & Poor's.

 The extended scheme comes into effect on October 12, when the initial scheme expires, running until December 31, 2011.

The amended prospectus also shows that UDC's committed loan facility from ANZ has been increased to NZ$800 million at September 30 from NZ$650 million. As of June 28, UDC had drawn down NZ$325 million from the facility, up from NZ$275 million at March 31, when it carried an interest rate of 3.71%. The facility has been increased by NZ$300 million since September 30 last year when it stood at NZ$500 million.

A UDC spokeswoman said the increase has nothing to do with the imminent expiry of the Crown's retail deposit guarantee scheme and any increase in debenture maturities. Rather, it stemmed from a change in an internal liquidity policy that would help UDC grow its business.

Cowell also told interest.co.nz last month that UDC was seeking an exemption from the related party rules included in the Reserve Bank’s non-bank deposit taker (NBDT) regulations due for introduction from December 1. This was because it was owned by a bank, ANZ, and ANZ is a registered bank regulated by the Reserve Bank.

However, the prospectus also notes that UDC's application, lodged on August 17, also seeks exemptions from the minimum capital and governance requirements in the NBDT regulations. UDC notes, however, that there's no certainty the Reserve Bank will grant the exemptions or on what conditions any exemption might be granted. The spokeswoman said UDC wouldn't comment further on the rationale behind the applications because its exemption applications were currently being considered by the Reserve Bank.

UDC is currently running advertisements, including on television, boasting that “we have lots of money to lend."

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