Money At Work: South Canterbury Finance bonds

Monday, 26 November 2007

South Canterbury Finance is raising about $125 million in secured bonds.

What is the company behind it?

Timaru-based South Canterbury Finance is one of the bigger finance companies in New Zealand, with a book of more than $1.39 billion in debentures and deposits.

Who is the target market?

This is ideal for investors willing to take on some higher risk-fixed interest investments.

What return does it offer?

The bonds' interest rate will be either 10.25 per cent, or set at a margin of 2.25 per cent above the five-year swap rate, whichever is the highest.

When was it launched?

The offer was launched on November 19 and closes on December 14.

What other products is it like or is it competing with?

There are a number of other bonds already listed on the NZX which are similar.

Is it long term, short term or medium term?

The bonds have a five-year term, maturing in December 2012.

What is the unique selling point of these bonds?

The bonds have a Standard and Poor's BBB- rating.

How strong a stomach do you need for it?

Putting money into a finance company in the current environment may seem a little mad. However, South Canterbury Finance does have a good track record - and its rate is reasonable considering the bonds have a Standard and Poor's rating of BBB-.

What's the hitch?

Perhaps the biggest risks are that South Canterbury Finance gets hit by the troubles in the finance company sector and an economic downturn impacts on borrowers' ability to repay loans.

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