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PGC makes its divisions transparent for eventual banking licence bid

Tuesday 23rd February 2010

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The separation of Pyne Gould Corp.’s businesses into three distinct and standalone units will greatly aid its eventual application for a banking licence, according to stockbrokers Forsyth Barr.

PGC will seek shareholder endorsement on March 4 for its proposed new directors and chairman, as well as for the announced changes to its subsidiaries Perpetual and MARAC. PGC has already appointed a new Perpetual board of John Duncan, George Kerr, Bruce Irvine, Jeff Greenslade and Bryan Mogridge to oversee its trustee and asset management activities. Perpetual is to have a separate corporate trust board of Keith Familton, Euan Abernethy and Keith Rushbrook who are all independent from other parts of the businesses.

MARAC’s new board is Greenslade, Mogridge and Irvine, to be joined by John Harvey and Michelle Smith, directing the finance group’s involvement in consumer and business lending. PGC’s strategic goal is for MARAC to apply to be a registered bank with the Reserve Bank, which takes into account whether directors have appropriate experience, integrity and skills.

“It’s part and parcel of a move to obtain a banking licence,” said Forsyth Barr analyst John Cairns. “It is necessary that individual businesses are seen as stand alone, that there’s no cross-party interests and that each business is transparent. You need to ensure that governance is beyond reproach.”

Shares of the company were unchanged at 44 cents and have dropped 14% in the past month. From a PGC management point of view, the divisions will ensure best practice, Cairns said.

“This will enhance their ability to get a higher credit rating, which in turn affects the cost of funds,” he said. “It can effectively differentiate them from other finance companies. They’d know what the Reserve Bank is seeking, but there’s a big difference between knowing what is required and getting there.”

Having overseen last year’s $273 million recapitalization, PGC chairman Sam Maling is to step down after the March meeting to be replaced by Bruce Irvine. Irvine and George Gould will be PGC’s appointees to listed rural services group PGG Wrightson, of which PGC has an 18.3% share.

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