Building Society Holdings in box seat to acquire PGG Wrightson Finance loans

By Gareth Vaughan

Building Society Holdings, the entity created through the merger of Marac Finance, CBS Canterbury and Southern Cross Building Society, appears to be in the box seat to acquire PGG Wrightson Finance now that China's Agria Corporation has secured control of the rural lender's parent, PGG Wrightson.

Agria declared it would consider selling PGG Wrightson Finance before securing 50.01% of PGG Wrightson earlier this month and in its target company statement addressing the Agria bid, PGG Wrightson said it was undertaking a strategy to "review the divestment" of PGG Wrightson Finance’s finance book.

Interest.co.nz understands PGG Wrightson chairman Sir John Anderson is overseeing the potential sale of the group's finance business, which had net loans and receivables of NZ$492 million at December 31.

Building Society Holdings, which will be known as Heartland New Zealand from June, is the only entity to publicly declare an interest in acquiring PGG Wrightson Finance . Managing director Jeff Greenslade told interest.co.nz in February Building Society Holdings was interested in consolidation opportunities "where they fit with our strategy" and rural New Zealand was clearly a fit.

Building Society Holdings, which like PGG Wrightson Finance is covered by the extended Crown retail deposit guarantee scheme until December 31 this year, says it has NZ$590 million to fund expansion. Building Society Holdings ultimately aims to become a Christchurch-headquartered bank and wants to double its NZ$2.2 billion asset base within five years through growing family, small business and agricultural lending.

Greenslade has been unavailable for an interview for the past two weeks and an Agria spokesman didn't respond to a request for comment on the Chinese firm's plans for PGG Wrightson Finance.

Meanwhile, interest.co.nz was also told that "one or two others" were also sniffing around PGG Wrightson Finance and/or looking at partnership opportunities. Possibilities the Agria-controlled PGG Wrightson is considering are said to include winding down the loan book to realise net tangible asset value, selling some or all of the book, or selling and looking to strike an ongoing agreement with the purchaser to originate loans - a bit like Fisher & Paykel Finance does with its bank backed securitization programme for the Farmers Card.

PGG Wrightson Finance cut 10 jobs towards the end of 2010 leaving the firm with 52 staff as it down sizes to match a shrinking loan book. The company posted a profit for the six months to December 31 last year of NZ$1.3 million, down from NZ$3.3 million in the same period of 2009 as credit impairments rose almost threefold to NZ$20.1 million.

GE Money mum on sale plans

Separately, GE Money won't comment on a report it has received final bids for its A$6 billion worth of Australian and New Zealand residential mortgages. The Australian Financial Review reported the book, including NZ$1.1 billion of New Zealand residential mortgages and A$350 million of non-performing loans, has attracted a range of bids.

Westpac, BNZ's parent National Australia Bank and ASB's parent Commonwealth Bank of Australia are believed to have jointly submitted with or funded offers for the performing loans, the AFR said. Peppers Home Loans, Columbus Capital and Bluestone Mortgages have reportedly put their hands up for the non-performing loans with support from Deutsche Bank, UBS and Goldman Sachs.

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