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Geneva to lose its wholesale funding line

Thursday 28th January 2010

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Geneva Finance has revealed that it will be losing its $35 million wholesale funding line from Bank of Scotland which will reduce its lending ability.

BOS has advised Geneva that it is unlikely to renew all the facility when it matures on Apri 30 next year.

“To be proactive in dealing with this Geneva has entered into discussion with BOS regarding a revised lending strategy. This strategy requires a lower level of lending which impacts future profit forecasts,” Geneva says.

It has also revealed that this change will also reduce its deferred tax asset by $3.2m and the company will create “a technical breach” of its lending covenant.

“This breach is of a technical nature because the underlying deferred tax asset remains available for the future benefit of the group. BOS are fully aware of this technical breach.”

Geneva says its discussions with BOS are “commercially sensitive but the board are confident of achieving an outcome that is in the best interests of all stakeholders.”

It also says that the company is committed to the consumer finance sector. Its key priorities being to:

  • Pursue funding opportunities and deliver solutions that are benefit all stakeholders.
  • Continued focus on the core operating activities of maximising income per loan, collections effectiveness (both old and new ledger), exercise tight control over operating costs and seek to continually increase staff performance and compliance.

Geneva says that current economic climate is a difficult one. “Funding is the key business issue. Changes to financial markets on both the global stage and within New Zealand have made it difficult to secure long term funding and it remains difficult to predict the extent to which the current recession will impact the company's ability to collect the ‘Old ledger’.”

The company has continued to repay investors both interest and principal.



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