Marac makes profit after offloading property book; makes progress on capital raising

Marac Finance announced a NZ$19.1 million profit in the 2009 financial year after it transferred its property development loans to owner Pyne Gould Corporation (PGC). PGC said that it had made significant progress on the capital raising it is looking to carry out for its goal of obtaining a banking licence for Marac. PGC announced an after tax loss of NZ$54.4 million following after-tax write downs of NZ$59.5 million from the property portfolio it took on from Marac. PGC also made a NZ$13.8 million loss on its 20.7% in PGC Wrightson. PGC CEO Jeff Greenslade said PGC expected to provide a further update on the capital raising in the second half of September, and that they expected any equity raising to be fully underwritten. "We have over the last month made significant progress on the capital raising with the appointment of First NZ Capital. We are close to determining the amount of capital required for the business to achieve its medium term goals. As part of that process we are working through the required due diligence and prospectus preparation process and expect to be able to provide a further update in the second half of September." "MARAC has a sound underlying business once the property development assets are removed. The expertise in our business means it has the perfect platform to expand its financing activities, albeit in a very disciplined and strategic way, both organically and through acquisitions. As signalled in the recent announcement extending the Crown Guarantee scheme, it is expected that industry consolidation will occur and we want to be at the forefront of this," Greenslade said. Marac's interest revenue for the 2009 financial year fell 2.6% from 2008 to NZ$168.9 million, while its interest and funding expense rose 0.6% to NZ$108.6 million. It is Marac's current intention to apply to be covered by the extension to the retail deposit guarantee scheme announced earlier this week, PGC said. The scheme was extended from October 2010 to December 2011, with a minimum entry requirement of a BB credit rating for the extension. Marac recently received a credit rating downgrade from Standard and Poor's from BBB- to BB+, but will still be eligible for the extended guarantee. Marac said that 30% of its debenture book was maturing after October 12, 2010.

Bernard Hickey talks to Greg Boyed on TVNZ's News at 8 about Marac Finance and South Canterbury Finance. Both announced big losses on property loans and are now looking for hundreds of millions of fresh capital to regain their investment grade credit ratings. Their quest for fresh equity will be closely watched by the Reserve Bank and the Government as they try to stabilise the finance company sector and avoid a big bill before the end of the retail deposit guarantee scheme.