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Money @ Work: PGG Wrightson Finance secured bonds

This week's Money @ Work looks at PGG Wrightson Finance's current bond offer.

Thursday, November 27th 2008, 2:40PM
What is it called and what sort of savings product is it?
PGG Wrightson Finance secured bonds.

Who is the company behind it?
PGG Wrightson Finance is a subsidiary of rural supply company PGG Wrightson. It is looking to raise up to $100 million through this offer. PGG is listed on the stock exchange (NZX: PGW) and is the largest agricultural servicing firm in New Zealand. In the year to March 31, it made a profit of $8.7 million and had assets of $507.5 million.

PGG Wrightson Finance has a deposit guarantee under the government’s new scheme.

Who is the target market?

People wanting a finance company investment that is less risky than debentures, and is liquid.

What return does it offer?
The minimum rate is 8.25%. However the final rate will be set on December 22 at 2.25% above the swap rate.

When was it launched?
November 19. It closes on December 22.

What other products is it like or is it competing with?
With the deposit guarantee scheme many of the fixed income products are all competing against each other now. This offer is similar to bond offers made in the past year by Marac and South Canterbury Finance.

Is it long term, short term or medium term?
It’s really a short-medium term investment with a maturity date in 2010. However, the company has the ability to extend the maturity period another year to 2011.

What is the unique selling point?
The offer gives investors access to a finance company involved in New Zealand’s rural sector, rather than property. Also bonds have some benefits over secured debentures, such as being tradable.

How strong a stomach do you need for it?
Having the guarantee lessens the risk on this investment, hence the offer’s rate is lower than what similar bonds have paid previously.

What's the hitch?
The two worst things that could happen are that New Zealand’s farming sector could turn to custard, and that the company looses its guarantee. Also it’s worth noting that the rate offered is less that what can be achieved against debentures.

« Who has got a guarantee?Marac launches high interest account »

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