Consumer lender Broadlands Finance, which turned down a NZ$100 million deal with Fortress Credit Corporation three years ago, hopes to bolster its funding base by grabbing a slice of the NZ$1.6 billion payout being made to South Canterbury Finance investors under the Crown retail deposit guarantee scheme this week.
Broadlands CEO Rudi Kats told interest.co.nz in a Double Shot interview that what South Canterbury Finance investors do with their money will be a good indication of the mood of the "mum and dad" retail investor. He said the Tony Radisich owned and Auckland-based Broadlands, which provides car loans, personal finance, commercial wholesale finance and invoice discounting facilities, hoped to pick up a slice of the South Canterbury Finance payout.
"I guess we’ll all know what’s going to happen with mum and dad investors once that comes on the market," said Kats.
"I think being South Islanders they’ll be pretty parochial, a lot of them," Kats added. "So I would say a lot of the money will stay in the South Island."
"But I’m also convinced that mum and dad’s need an investment vehicle and that they need to get interest on their money and 3% at the bank is probably not that attractive. So I guess Broadlands is a pretty good alternative for them."
Kats said Broadlands, whose current prospectus seeks minimum investments of NZ$500 and which has a BB- credit rating from Standard & Poor's, would pay interest of between 8% and 10% depending on the terms of investments.
South Canterbury Finance's debenture and deposit holders will get back about NZ$1.25 billion today. About 7,000 bond holders were paid NZ$350 million on September 23. The payments come after the collapse into receivership of the company on August 31 triggered a NZ$1.6 billion payout to 35,000 investors' under the Crown retail deposit guarantee scheme.
'Could be better'
Asked how Broadlands efforts to attract debenture funding were currently going, Kats said it could always be better. He said the company only had about NZ$7.5 million of external debentures on issue. The company's prospectus notes that wealthy car dealer Radisich and/or his associated company Timberton Investments Limited, hold NZ$3.68 million of Broadlands debenture stock. Radisich also has loans to Broadlands worth NZ$6.265 million.
Kats said Broadlands, which is confident of meeting the Reserve Bank's new non-bank deposit taker regulations due for introduction on December 1, aimed to build its debenture funding up to NZ$30 million to NZ$40 million over the next two years. Broadlands is not in the extended Deposit Guarantee Scheme.
But he said Broadlands was also being realistic, acknowledging it needs to source other forms of funding. He said overseas companies such as banks, finance houses and investment houses, were looking for opportunities in New Zealand.
"We have got a few irons in the fire and let’s just see where that goes," said Kats.
Turned down Fortress
He acknowledged that one or two of the parties Broadlands was talking to might be considered vulture funds. However, it had been "a little while" since Broadlands had talked to Fortress, from whom Broadlands, Kats maintains, turned down a NZ$100 million deal in 2007.
Kats said the Fortress offer was declined due to "cost of money" and because Broadlands had a choice.
"At the time we didn’t like the deal," Kats said. "But the cheque was there, we could have signed a contract and started."
He acknowledged that the offer was tempting.
"Oh absolutely, NZ$100 million is a lot of money," said Kats.
"(And) there’s obviously other companies in New Zealand that have done business with these people (Fortress) so I guess we need to ask them and see how successful that’s going to be over time."
These include consumer lender Instant Finance and the now defunct property development lender Hanover Finance.
Kats said Fortress seemed to still be do business in New Zealand and if the right deal was on the table, Broadlands would be keen to talk.
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