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Allan Hubbard's South Canterbury Finance is to raise up to $100 million in a bond issue to institutions and retail investors as it builds up a war chest to cash in on lending opportunities created by finance-company turmoil.
The company, owned by Hubbard, 79, one of the South
Island's richest men, yesterday said it planned to offer up to $75 million five-year fixed-rate secured bonds with capacity for a further $25 million in oversubscriptions.
Chief executive Lachie McLeod said it had been considering a bond issue for the past three years.
He has previously indicated the company's debenture reinvestment rate has held up despite the investor rout sparked by the 10 finance company failures of the past 18 months, but yesterday said the bond issue was partly intended to reduce his company's reliance on that sort of funding.
But the main driver was the "fantastic opportunities" resulting from funding difficulties faced by many of South Canterbury's rivals.
"Where everyone in this industry has put the brakes on, it's business as usual for us.
"We want to build a war chest for ourselves to utilise to pick up those opportunities in the new year.
"With our strength and balance sheet, it's time for us to go on the front foot," McLeod said.
But the company was eyeing only "sound lending opportunities" within its current areas of activity - including business, rural, and large plant financing - and not acquisitions.
"I just don't believe in purchasing companies and buying other people's warts."
The bond issue announced yesterday comes just days after the company sold its 12.75 per cent stake in dairy farm owner Dairy Holdings, netting itself a $40 million profit, although the transaction was essentially a rearrangement of Hubbard's portfolio.
The buyer was Hubbard investment vehicle Southbury Group, which also sank a further $25 million in capital into the finance company giving it a total shareholder equity of over $260 million.
The new South Canterbury bonds will be offered via NZX firms, other approved financial intermediaries and through a public pool.
The yield will be fixed at 2.25 percentage points above the five-year swap rate or 10.25 per cent, whichever is higher at the offer's closing date, and the bonds will be listed on the NZDX.
South Canterbury, one of a handful of NZ finance companies with an international investment grade rating, already has $120 million in perpetual preference shares which were issued and listed last year.
