Farmers' Mutual Group's decision to provide meat processor Affco with a $65 million cash injection is the first part of a new yield orientated fund it is developing.
Farmers' Mutual Group's decision to provide meat processor Affco with a $65 million cash injection is the first part of a new yield orientated fund it is developing.
The $65 million is made up of three elements. The biggest part, $45 million, is to come through a public issue of high yielding debentures.
Chief executive Michael Millar says a new investment company, Farmers Mutual Debenture Investments (FMDI), is being established to make the offer and it will look for other investment opportunities.
"Our plan is to fulfil an investor demand for high fixed yield returns at a time when interest rates are falling," he says. "We would like a significant amount of diversification in the fund."
Currently it is evaluating some other investments, plus it had found there was an opportunity to buy some convertible note issues which had become "mispriced badly".
He says FMDI is not interested in exposing people's capital to unnecessary risk and it won't be buying any of the junk bonds that are currently in the market.
Millar says there is a demand for high-yielding investments and he expects the fund will reach $100 million mark within 12 months.
"Getting depositors' money in won't be a problem," he says. The limiting factor for the fund will be finding suitable investments.
Millar says he initially had some reservations about investing in Affco because of its poor recent performance and the depressed state of the meat industry in New Zealand.
However, he says that after closely examining the company, seeing what it had done to improve its financial structure and finding out about its future plans he was satisfied it had a promising future.
Farmers' Mutual Group's decision to provide meat processor Affco with a $65 million cash injection is the first part of a new yield orientated fund it is developing.