Published 3 January 2010
PGG Wrightson Finance Ltd became the first finance company to offer both guaranteed & non-guaranteed investments under Treasury’s recent revision of the Crown retail deposit guarantee scheme.
Another 6 institutions have opted out of the scheme – the Aotearoa & Christchurch Emergency Services Credit Unions, Asset Finance Ltd, Whakatane; Farmers Mutual Finance Ltd, Palmerston North; Mutual Credit Finance Ltd, Christchurch; & Rockforte Finance Ltd, Gisborne. $84 million of existing investments with them will remain guaranteed until the earlier of the date they fall due or 12 October, but rollovers & new investments won’t be guaranteed.
The changes took effect on 1 January, when Treasury gave institutions the option of accepting revised deeds or ceasing to offer guaranteed deposits. Under the revised scheme, deposits will be termed guaranteed or excluded securities.
63 institutions that continue to participate in the scheme have $130 billion of deposits guaranteed.
PGG Wrightson Finance registered a new prospectus on 21 December to cover the addition of the excluded securities. Finance director Mark Darrow said interest rates for excluded securities would be around 1% higher than for guaranteed securities.
Mr Darrow said the change in the scheme allowed a much longer & more balanced transition – effectively over 2 years – back to “business as normal, where all companies are judged on their merits without the underpinning cover-all guarantee. If you consider that the fundamental reason for the guarantee scheme in the first place was to support the weaker finance companies and thereby their investors, you could imagine that, as one of the larger & stronger companies, we look forward to the ultimate cessation of the scheme. Notwithstanding, we recognise the need to provide stability during one of the worst financial times in recent history. “By the time the extended Crown guarantee scheme finishes in December 2011, the investor market would have had an extensive period to view the operation of the new non-bank-deposit-taker regulatory framework, which includes much more robust governance, including a compulsory credit rating, independent directors, a detailed risk management programme & new capital adequacy requirements. This will provide much higher levels of transparency, surety & comfort for investors.” Mr Darrow said PGG Wrightson Finance maintained its key reinvestment rates at close to 80% over the last 6 months and had only dropped below 65% for one month in 3 years. Want to comment? Go to the forum.
Attribution: Company release, Treasury release, story written by Bob Dey for the Bob Dey Property Report.