By Gareth Vaughan
The managing director designate of the proposed “Heartland Bank” is eyeing a whole financial lifecycle strategy for the new financial services provider.
Speaking at a Marac Finance stockholders meeting in Auckland yesterday, Jeff Greenslade who is in line to head up the entity created through a merger of Marac, CBS Canterbury and Southern Cross Building Society, took questions from the floor after the meeting failed to attract the required quorum.
Marac needed investors’ representing 50.1% of stock by value to either post in proxies or turn up at the meeting to establish a quorum. In the event, the finance company secured just 29.3%, or NZ$260.5 million. That means the meeting has been rescheduled for December 8 with proxies carried over and the quorum will be met by those present in person or by a representative, irrespective of the number and amount of stock they hold.
Asked by one of the about 40 investors present where he saw potential for the new entity to grow, Greenslade said the main opportunity was from securing additional business from existing customers. Looking at the three partners’ existing operations, Greenslade noted Marac provided mainly vehicle loans to predominantly middle income New Zealanders and plant equipment loans to small and medium sized businesses and the rural sector.
“We don’t see our customer profile changing,” Greenslade said.
Rather the merger benefits should be doing more with existing clients. The three merger partners combined have about 91,000 borrowers and investors.
“For example the financial lifecycle that we’d like to achieve,” Greenslade said. “Let’s take a young person, late 20s, early 30s. Maybe the first financial need they have is to buy a motor car. With the Marac product we’ve already got we can provide that.”
“The next thing is a home. Through the building societies we now can give them a residential mortgage,” added Greenslade.
“Ideally our perfect customer also has a small business or a farm and we want to build our capability to give them – apart from plant equipment – financing (and) some working capital and then, as they progress, to be able to absorb some of their spare cash through deposits, and ultimately to be part of their retirement planning.”
Selling more products to existing customers of Marac, CBS and SCBS was the aim, rather than just selling individual products.
“Which is predominantly what is happening currently in the financial services sector.”
CBS shareholders vote 'yes'
The merger plans call for Marac to merge with the two building societies to create greater scale and tap a bigger retail deposit funding base, seek an investment grade credit rating and bank licence from the Reserve Bank. The plans envisage a NZX-listed "Heartland Bank" that would aim to double its NZ$2.2 billion asset base within five years through growing lending to families, small business and the rural sector. The merger partners are seeking support for the deal from stakeholders - covering shareholders, members, debentureholders, bondholders and depositors, this week.
So far SCBS shareholders and Marac PIE fund unitholders have voted overwhelmingly in favour of the deal. However, Monday’s meeting for SCBS depositors, like the Marac stockholders’ meeting, failed to secure a quorum and has been rescheduled for December 7.
On Wednesday afternoon CBS shareholders voted in favour of the deal. Approval was required from at least 75% of CBS shareholders voting by number, with the deal supported by 90.45% of those who voted.
CBS depositors vote on the proposed merger on Friday and shareholders of Marac’s parent, Pyne Gould Corporation, are also set to vote on Friday.
Should support from all groups be secured, the merger is set to be implemented from January 7 with the new entity, provisionally known as Building Society Holdings Ltd until a name is settled on, aiming to list on the sharemarket in February and apply for a banking licence next July.
'Secured' versus 'unsecured'
Meanwhile, Craig Stephen, Marac chief investment officer and Treasurer designate of “Heartland Bank”, addressed Marac investors’ concerns about their investments becoming unsecured in the new entity as opposed to their current secured position with Marac. Stephen said concerns about this shift were “ill founded” in that Marac stockholders’ ranking in a potential wind up situation would be unchanged.
“All banks are unsecured, building societies are unsecured. So what we’re looking to do now is start as we mean to continue,” Stephen said.
He said the independent report on the proposed merger, by Northington Partners and Cameron Partners, stated their position as investors wouldn’t be disadvantaged as a result of the merger. Furthermore, stockholders in the new entity would rank equal to a NZ$200 million bank loan facility provided by BNZ and Westpac.
“Both of those organisations will be unsecured so they’ve done their due diligence on the firm and determined that they are comfortable with the exposure,” said Stephen.
“I think that’s two independent reference points that you can point to that should give you some comfort around that position.”
Asked about potential for prior charges, or permitted securities, Stephen said the new entity’s trust deed (its trustee will be Trustees Executors) allowed for up prior charges against up to 5% of the group’s assets although the deal with BNZ and Westpac specifies only 1%. Stephen said there were no plans for “Heartland Bank” to allow any prior charges or other than statutory ones such as Inland Revenue Department claims.
He also criticised past use of the term “secured” by some in the non bank deposit taking sector which he said had given some investors' an unrealistic view about their level of security.
“I’m not suggesting that Marac has been guilty of that in the past. But I believe that’s terminology that has been loosely bandied around in the past," said Stephen, who joined Marac last year and has previously worked for Westpac and Fonterra.
Now defunct property financiers Hanover and Bridgecorp were among those to refer to “secured” debentures held by their investors.
(Update adds outcome of CBS shareholder vote).
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