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Heartland dips into cash reserves to repay Wrightson Finance bond

Tuesday 8th November 2011

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Would-be bank Heartland New Zealand dipped into its surplus cash reserves to retire $92.3 million of PGG Wrightson Finance bonds it took on board when it acquired the rural service company’s loan book earlier this year.

Heartland repaid the bond’s investors when the debt matured last month, drawing on its surplus liquidity buffer of cash, liquid assets and unused funding lines, it said in a statement.

The lender had surplus liquidity of $496 million as at Oct. 31, down from $586 million at the end of August.

The lender said it was moving more deposits beyond the expiry of the government’s extension to the retail deposit guarantee at the end of the year, with the terms of more than 99 percent of new deposits and 92 percent of rolled over deposits extending past the Dec. 31 cut-off point.

Its annual reinvestment rate was stable at 73 percent in the year ended Oct. 31, Heartland said.

The firm was formed this year through the merger of Pyne Gould Corp’s Marac Finance unit, and the Canterbury and Southern Cross building societies in a bid to form a New Zealand-listed and owned registered bank. The lender is currently in the process of applying for a banking licence.

The Wrightson Finance acquisition was completed with Standard & Poor’s upgrading the loan book’s rating to BBB-, in line with Heartland’s credit rating, and then withdrawing the rating as it no longer independently issues debt securities.

Last week, Heartland director Pyne Gould chairman Bryan Mogridge decided not to seek re-election at the company’s annual meeting, after Pyne Gould minority shareholders called for him to sit on just one board.

Pyne Gould, which holds a 6 percent stake in Heartland, is facing a takeover bid from cornerstone shareholders George Kerr and Californian hedge fund Baker Street Capital.

Shares in Heartland were unchanged at 51 cents in trading today, and have sunk 43 percent this year.

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