UDC Finance draws record inflows in Dec quarter
As fixed income investors reallocated their portfolios following the expiry of the government’s retail guarantee scheme and put more emphasis on an entity’s credit rating, the beneficiary seems to be UDC Finance which saw record inflows in to its debentures in the latest quarter ending December 2010.
Thursday, March 24th 2011, 7:42AM
by Sophia Rodrigues
The finance company which is an arm of ANZ National, saw inflows rise by $224 million to $1.60 billion, up 16.3% from September's $1.38 billion. For the 12-month period ending December 2010, inflows have risen 15.8%.
From about $2.08 billion in September 2006, UDC's stocks of debentures have been mostly dropping, touching a low of $1.38 billion in September 2010 before rising sharply in the latest quarter.
At a rating of AA, UDC has the highest rating among all finance companies but chose not to enrol into the government's extended guarantee scheme. Investors who are now more enticed by the safety offered by an investment rather than the rate, seem to be getting drawn to the level of security indicated by the AA rating.
In terms of the rate offered, UDC has been sitting slightly above the rates offered by the big banks. Currently offering 4.85% on a 12-month debenture, UDC's interest rate compares with 4.70% offered Westpac, Kiwibank and TSB Bank and is much lower than 5.25% offered by BBB- rated CBS Canterbury which also carries the benefit of a government guarantee.
The increase in debentures has resulted in a fall in UDC's reliance on funding from parent ANZ National. By December, UDC had repaid $150 million of the $450 million funding it had availed as of September 2010. The latest position on this is not known.
UDC has a committed credit facility on demand with ANZ National of $800 million which carried an interest rate of 4.20% as of September 2010. The term of the facility was increased to two years from one year during the latest financial year ending September 2010.
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