PGG Wrightson Finance - one of just seven entities still covered by the Government's extended retail deposit guarantee scheme - has secured a three-year $100 million revolving-credit bank facility.
The facility takes it beyond the end of the guarantee scheme by two years. At present, about 30% of PGG Wrightson Finance's retail deposits are either not subject to the Crown guarantee or are invested beyond the Crown guarantee expiry date.
The Bank of New Zealand and Commonwealth Bank of Australia have committed to an extension of their bank facilities for three years, PGG Wrightson Finance chief executive Mark Darrow said.
"It is important that we lengthen our maturity profile out past the end of the guarantee scheme [which finishes] in December 2011," Mr Darrow said in a statement yesterday.
While more than 90 entities were in the Government's first scheme, just seven were accepted into the extended scheme, with a total of eight failed finance companies being paid out under the scheme by the Government.
Craigs Investment Partners broker Peter McIntyre said the announcement by PGG Wrightson Finance, a subsidiary of rural service provider PGG Wrightson, was "positive and timely".
"Extending the length of the facility is absolutely crucial for PGG Wrightson Finance," Mr McIntyre said.
"They are in a good position to pick up the slack from the demise of other companies, such as South Canterbury Finance."
He emphasised that many of the dozens of finance companies that had failed or been placed in moratorium during the past two years - tying up or losing about $6 billion in investor funds - had "borrowed short [term] while lending long [term]", which affected the ability of many of them to repay on time.
In its financial result for the year to June, PGG Wrightson Finance saw its loan book decline 5% to $530 million, on the back of taking a cautionary approach during the volatile period, with revenue flat for the year at $59.7 million.
However, its overall reinvestment rate had risen to 77%, with a record 90% reinvestment in June. Impairment losses of $8.9 million for the period, mainly due to lending in the dairy sector, were offset by interest on income, Mr McIntyre said.
With the demise of several lenders in the rural sector, PGG Wrightson Finance would want to go back into the rural market, as financing
