Litmus test for South Canterbury as key business up for sale
The value of a key business of South Canterbury Finance will be known in coming weeks or months as receivers for the company put the company’s plant and equipment lending business for sale.
Thursday, February 17th 2011, 7:48AM
by Sophia Rodrigues
Receivers Kerryn Downey and William Black of McGrathNicol announced they were putting FACE Finance Ltd for sale with the sale process being run by Deutsche Bank.
South Canterbury conducted its plant and equipment lending business through FACE Finance Ltd where it has a 75% stake. This business was the second largest and formed 18% of South Canterbury's net loans as of December 31, 2009 and has traditionally been the company's main growth area. South Canterbury major business was business loans forming 44% of its net receivables as of December 2009.
In April 2010, South Canterbury had established three main operational groups and the best among them included the core well-performing finance business which contained the bulk of the company's performing business, rural, consumer and plants and equipment loans.
As per the receivers first report, FACE Finance's net loan book as of August 31, 2010 stood at $196.9 million which included plant and equipment loans of $199.4 million and business loans of $5.9 million. Impairment provisions stood at $8.5 million. Net assets stood at $8.2 million after deducting $197 million loan from South Canterbury.
This is far lower than the loan position as of December 2009 when South Canterbury's share of FACE's net plant and equipment loans stood at $275.4 million. This consisted of 534 loans with average net value of around $515,783 and the largest loan size was $21.2 million. 65% of the gross loans were secured by first ranking charges while the balance was secured by second ranking or subsequent charges.
The sale of FACE Finance will be the first sale of a major South Canterbury business and likely to attract good interest given South Canterbury itself saw it as a business it wanted to focus on.
Receivers of South Canterbury have already put up for sale a 62.5% shareholding in Dairy Holdings where the company has a 33.6% interest. The outcome of the sale process which began prior to Christmas, is yet to be announced. There are also plans to sell Helicopters NZ and 80% stake in Scales Corp.
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