In a new venture for agriculture the BNZ has got involved in equity partnerships to help develop companies that are short of capital.
While at this stage these ventures appear to be involved with operations further down the product chain, would farmers be happy if they got involved more directly with farm ownership?
With ever increasing land prices, equity partnerships are being considered as a method to combat higher capital requirements and prevent burdening debt levels. Should banks be involved in this process? Your views?
BNZ is taking ownership stakes in agricultural sector firms to help them fund growth projects reports the NZ Herald. Head of agribusiness Richard Bowman said the company had taken part in 15 transactions - including equity, hybrid equity or subordinated debt - since 2008, with the bank making a contribution worth about $75 million in total. It was a totally different partnership from lending money, Bowman said. "If you're lending money, banks are looking to mitigate their risk whereas if we're involved in an agri-capital type transaction it's actually about creating wealth."
The transactions have been with firms in areas such as dairy, sheep, beef and viticulture and usually involved a project element or capital restructure.Capital markets in NZ were very thin, Bowman said.
The bank did not want to control the transaction, he said."We want our clients to own their assets entirely over time so we'll sell our shareholdings back to these guys very readily and at the earliest opportunity." The bank had seen transactions where people had brought in external investors who sat passively, made money and did not want to get out."We see us as an enabler, we want to churn our capital through a lot of businesses just to enable people to get these transactions done if they want to and ultimately they will own and control their whole business again."
12 Comments
"If you're lending money, banks are looking to mitigate their risk whereas if we're involved in an agri-capital type transaction it's actually about creating wealth."....that mouthful almost had me choke on me cornies...
between the lines it reads thus
"If you're lending money you come under the RBNZ regulatory controls such as they are!...the bank has found this loophole to avoid those controls and we will spin our activity as being a wealth creating agri-capital transaction......"
Blow that out your ear...Alan Bollard.
Happening all the time TommyB, Casual Observer is quite right. I know of a Central Hawkes Bay farm that has been up for mortgagee sale, recived cash offers which the bank has deemed too low and turned down as it would affect the values of other properties and therefore the banks security on other loans. The farmer "owners" have no equity left and wish to exit but the bank won't let them. They are not a BNZ customer.
This is why we are not seeing much bank losses, banks taking ownership stakes in agricultural sector firms and farms is the ultimate extend and pretend....
Its still usury
>>>>>>
But one must always consider that usury, in historical context, has always been inextricably linked to economic abuses, mostly of the masses clarification needed]. The main moral argument is that usury creates excessive profit and gain without "labor" which is deemed "work" in the Biblical context. Profits from usury are argued not to arise from any substantial labor or work but from mere avarice, greed, trickery and manipulation. In addition, usury is said to create a divide between people due to obsession with monetary gain. http://en.wikipedia.org/wiki/UsuryPeople People People.
This piece could not be more cynical if they tried. I actually thought more of Owen Hembry as a Herald writer.
Debt for equity. Nothing more nothing less. It is worth more on a Bank's balance sheet as 'equity' rather than 'debt'.
BNZ have been doing this since 2008 as well as offering cut priced interest to avoid having to declare impaired loans.
As a marketing guru once said, 'you can't shine a turd but you can roll it in glitter'
People People People.
This piece could not be more cynical if they tried. I actually thought more of Owen Hembry as a Herald writer.
Debt for equity. Nothing more nothing less. It is worth more on a Bank's balance sheet as 'equity' rather than 'debt'.
BNZ have been doing this since 2008 as well as offering cut priced interest to avoid having to declare impaired loans.
As a marketing guru once said, 'you can't shine a turd but you can roll it in glitter'
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