Broadlands Finance has ended its campaign to attract New Zealand debenture funds.
According to independent chairman Nigel Smith, Broadlands will run down its existing debenture book and pay out all investors as each deposit falls due.
Broadlands currently has NZ$7.4 million owing to retail debenture investors and Smith told interest.co.nz that all those investors will be repaid in full, including the current interest terms agreed with each of them. There are 258 investors involved in this phase-out.
Approximately NZ$6.3 million will be outstanding at March 2012 and the book runs down quickly after that, with only NZ$1.3 owing at March 2013. Investors in Broadland's debentures typically took a 15 month maturity. The final payment is scheduled for 2015, although the company said it will probably seek to defease the debenture payment obligations to the trustee in order to end the regulatory obligations and those related costs.
Smith stated that running a local debenture marketing campaign was "just too expensive" pointing out that it cost "just under NZ$1 million" for the audit, credit rating, and trustee requirements, and that was too high a load on a book of only NZ$7 million.
Essentially, owner Tony Radisich will "privatise the company" while they look for a sustainable funding model. Smith observed that they need about NZ$40 million in funding "to be sustainable" and the recent marketing campaign could not find any significant traction from the New Zealand public to move to that level ... "and in the current climate, that is probably understandable". He also confirmed that their recent attempts to seek funds in Japan had met with a similar lack of interest.
The recently-appointed general manager, Steve Wilkinson has already left the company. The retail funding manager Andrew Mexted-Bragg has also left.
The company told interest.co.nz that they continue to lend, and the lending side of the business is unaffected by this change. It also has an active insurance operation, including PetInsure, and those operations are trading well.
The move away from retail debenture funding will see it give up its Standard & Poor's credit rating which is currently a "B", although it will need to maintain some sort of credit rating for its insurance division.