Rates Round Up

Deposit war not likely to abate for the next two years;  Ivan Erceg bankruptcy hangs over Dorchester Pacific:PGG Wrightson switches facility from South Canterbury Finance to banks

Monday, 8 February 2010

Deposit war not likely to abate for the next two years: PwC
The deposit war is unlikely to abate for the next two years as new liquidity requirements for banks and non-bank deposit takers are set to put upwards pressure on rates as financial institutions try and restore trust among investors.

Sam Shuttleworth, financial services partner at PricewaterhouseCoopers, said the government's new liquidity requirements for banks that will see them forced to increase the amount of cash they source from retail deposits and long-term wholesale funds is putting "upwards pressure" on deposit rates, and the Reserve Bank's discussion document on similar measures for NBDT will do the same thing.

"Trust needs to be restored and what the Reserve Bank has been doing over the last 24 months is restoring that," he told depositrates.co.nz. "It's very good for those who have savings."

Erceg bankruptcy hangs over Dorchester Pacific
Dorchester Pacific, the finance company that has paid investors 42.5% of $168 million of frozen funds, has had to boost its provisioning by $1 million after boatbuilder Ivan Erceg was made bankrupt last week.

Cayman Island-based yacht company Balenia succeeded in bankrupting the brother of the late liquor baron Michael Erceg after many failed attempts by various creditors. Dorchester Finance, with Public Trust, had filed a separate bid which was due to be heard on Feb. 11. Dorchester is owed some $3 million, according to the first receiver's report for Erceg's Sensation Yachts, and took possession of a super yacht estimated to be worth $5 million.

Executive director Paul Byrne said the position had already been incorporated into the company's forecasts for its bid to exit its moratorium. Dorchester is proposing to pay its 7,200 investors 50 cents in the dollar, give them ownership and control of the company's hotels along with proceeds of any sales with operating returns, and a three-year interest bearing note.

PGG Wrightson repays South Canterbury Finance
PGG Wrightson repaid its $22.8 million subordinated debt facility to South Canterbury Finance and switched the facility to its existing banking syndicate with ANZ National Bank, BNZ and Westpac.

Managing director Tim Miles said the company's capital raising allowed the company to repay the debt, and the switch to the banking syndicate "provides some consequent interest savings."

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