Insurer's float unfazed by market jitters

Traders at the dealing room of the KEB Hana Bank in Seoul. Tumultuous world markets shouldn't affect the actual business of CBL, say the owners of the latest company to list on the NZX. Photo / AP

CBL hopes to raise $132 million, including $90 million in new capital, in New Zealand’s second IPO of year.

With equity market volatility on the rise, CBL Corporation boss Peter Harris admits it isn't the perfect time to launch an initial public offering.

"But frankly none of that affects our business," Harris says. "Volatility is certainly not an issue for us and the long-term investors that we're looking for can see past that."

The Auckland-based credit surety and financial risk insurer yesterday registered a product disclosure statement for New Zealand's second IPO this year. CBL is aiming to raise up to $132 million, including $90 million of new capital, and its shares are expected to begin trading on October 13 on the NZX and Australia's ASX.

The company said the new cash would increase its regulatory capital and fund its $46 million acquisition of Australian specialty insurer Assetinsure Holdings.

CBL, whose products include residential builder warranties and construction bonds, has set an indicative price range of $1.45 to $1.85 for its shares, which values the company at $324 million to $389 million.

Final pricing for the offer will be set through a bookbuild process with brokers and institutional investors on September 17. Existing shareholders, including Harris, are expected to retain a 60 to 63 per cent stake in CBL following the offer. The firm's majority shareholders and senior management will sell up to 15 per cent of their aggregate pre-offer shares.

CBL's offer comes at a jittery time for markets. Fears about China's economic outlook and the prospects for global growth have investors on edge. At 5pm last night the S&P/NZX 50 had fallen 6.5 per cent from its August 3 peak, while the S&P/ASX 200 had fallen 16 per cent from its recent high point.

New Zealand saw a flurry of listings last year, including 12 NZX main board IPOs. However, the NZX has seen only one public share offer this year - freight and logistics operator Fliway Group, which listed in April.

Harris said the volatile market environment could have a small impact on the final pricing of CBL's offer.

"But we're talking with investors who see well through this and are looking at the fundamentals and the track record of the company."

CBL Corporation boss Peter Harris

CBL derives almost 98 per cent of its gross revenue outside New Zealand, mostly in Europe. France, where cover for residential building works is compulsory, is a major market.

Around 53 per cent of the company's pro forma gross written premium is expected to come from France this year.

Harris said the recent weakening of the Kiwi dollar was expected to benefit the firm's bottom line. And, while the outlook for the global economy has darkened, he said CBL's business had proved "immune" to previous economic downturns. "We're spread across different international markets as well as products."

CBL has forecast net profit to rise from $19.4 million in the 2014 calendar year to $26.1 million in 2015 (excluding the contribution of the Assetinsure acquisition) and $40.4 million in 2016. Including Assetinsure, a $29.2 million profit is forecast for 2015 from a gross written premium of $335 million.

A broker-firm offer will open on September 21 and close on October 6. There is no public pool.

UBS and Forsyth Barr are joint lead managers of the offer, while Bancorp and law firm Minter Ellison Rudd Watts are advising the IPO process.

CBL offer

• Will raise up to $132 million, including $90 million of new capital.
• Expects to list on the NZX and ASX on October 13.
• Indicative price range of $1.45 to $1.85 per share.
• Values the company at $324 million to $389 million.
• Existing shareholders will retain 60% to 63%.