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."
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