by Sophia Rodrigues
MARAC Finance, Southern Cross Building Society and CBS Canterbury announced a merger plan in September with the aim of creating an NZX-listed banking and financial services group, and applying for a banking licence for one of the units Combined Building Society. The proposed bank has been dubbed "Heartland Bank."
"Based on our discussions with the RBNZ and the observed timeframes required for recent applications for bank registration, we suggest that the process for Combined Building Society could realistically require anything between one to two years from the merger date," the report said.
The report noted that the Combined Building Society is capable of meeting the RBNZ's registration criteria but such a registration will only be possible if the merger is implemented successfully and key short-term targets for the new business are fully met.
In their information document, the merging entities cited the government guarantee as one of the key requisites for the merger. "The merger will not proceed unless the merged group's major operating subsidiary, Combined Building Society, has been granted a Crown Guarantee," they said.
The government's extended guarantee scheme expires on December 31, 2011 and while each of the three merging partners have been accepted in to the scheme, the combined entity needs to apply to get a guarantee.
Inability to obtain an investment grade credit rating is also an important factor which is expected to affect their aspirations of getting a banking licence - a strategic goal of the merged group.
The group provided its debt funding and liquidity strategy and said it will source funds from a diverse base, comprising retail deposit and debentures, NZDX bonds, a syndicated bank facility and a securitisation programme.
As of June 30, cash and liquid assets stood at $300 million and total funding of $2.04 billion comprised mainly of $1.56 billion of retail deposits and debentures.
The group has negotiated new standby liquidity facilities with the Bank of New Zealand and Westpac to replace existing facilities of MARAC. The syndicated cash advance facility comprises of tranche A and B of $100 million each which will commence not later than the merger date and has maturity of March 31, 2012 and March 31, 2013 respectively.
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