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Marac not facing funding cliff

Marac has benefited greatly from the government’s guarantee of its debentures but it won’t be facing a funding "cliff" once the guarantee expires.

Tuesday, March 3rd 2009, 11:35PM

by Jenny Ruth

"We have no liquidity cliff at Marac to deal with," chief financial officer Alan Williams told a briefing of financial advisers on Marac’s results for the six months ended December 31.

Over the last couple of months between 25% and 30% of new money coming in has been for terms beyond the guarantee period, most of it "in the three-year bucket," Williams said.

Before the credit crunch hit, most of Marac’s debenture funding was less than two years with only about 5% beyond that, he said.

Marac has a strategy in place to continue lengthening the term of its debenture book, as well as diversifying its funding sources to include bank funding and its retail bond issue.

Pyne Gould and Marac managing director Brian Jolliffe said the company isn’t banking on the government guarantee being extended and is assuming it will expire in October 2010.

Jolliffe said Pyne Gould still intends to turn Marac into a listed bank but indicated that will take time, probably years.

When Pyne Gould first announced in September last year its plan for Marac to become a bank, it said it was reviewing its non-banking asset, particularly its 21.6% stake in rural services company PGG Wrightson.

"For example the board is considering doing an in specie distribution to shareholders of its PGG Wrightson stake. This is likely to be done over time by way of future dividend options to align with imputation credits. The board will also consider other structural options," the company said then.

Jolliffe says some journalists misinterpreted that to mean the company intended to sell the PGG Wrightson stake. "We are not going to do that for our shareholders" in current market conditions "and at a time when PGG Wrightson needs the support of its major shareholders," he said.

Marac is working with the Reserve Bank on early documentation but "it’s not a simple process, particularly for an existing business. When we’re able to tell the market more about the timing, we will."

The government guarantee provides a window of opportunity but "we’re not committing ourselves to that window."

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