Rates round-up: October 23

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Pimco eyes New Zealand bonds; Heartland rating affirmed; Hubbard hearing delayed

Tuesday, October 23rd 2012, 10:04AM 1 Comment

by Niko Kloeten

Giant bond fund manager Pimco says it is looking to increase its exposure to New Zealand due to the “structural” strength of our economy.

Scott Mather, the firm’s head of global portfolio management, told a briefing hosted by Tower in Auckland last week that the “debt dynamics” in New Zealand and Australia are “much better than other regions of the world”.

He said New Zealand is “a bigger part of our portfolio than it’s been for some time” and this is partly because there are “not as many structural weaknesses that could make it a poor investment for us.”

The big factors in our favour, he said, are the relatively strong state of New Zealand’s economy (making zero-interest rate policies unlikely) and this country’s low levels of public sector debt.

The firm also examines private sector debt because “private sector debts have a way of morphing into public sector debts,” according to Mather, who said New Zealand’s private sector debt is high but not enough to be a major concern as of yet.

Heartland rating affirmed

Heartland New Zealand has had its credit rating affirmed at BBB- (the lowest investment-grade rating) with a stable outlook by ratings agency Standard & Poor’s.

The affirmation comes as Heartland awaits a decision by the Reserve Bank on whether it will secure a banking licence.

S&P cited strong capital and earnings and good geographic and business diversity as some of Heartland’s strengths, while its weaknesses were seen as a reliance on retail deposit funding and its relatively small size.

Gaining a banking licence “would support an improved business position, as would evidence of enhancements to Heartland's franchise strength and stability over a longer period,” according to S&P, which said Heartland was well positioned for Basel III capital requirements.

Heartland reported a $23.6 million net profit for the year ended June this year.

Hubbard hearing delayed

A court wrangle over $60 million worth of Hubbard assets has been delayed until next year to give the statutory managers more time to prepare.

The case, which affects about 400 investors, was due to be heard in the High Court at Timaru next Monday October 29, but it has been adjourned by Judge Lester Chisholm until May 20 next year.

The case involves a battle for control of $60 million worth of assets promised by the late Allan Hubbard to investors in Aorangi Securities.

His wife Jean is claiming ownership of the $60 million and her lawyer Andrew Butler has raised concerns she may not be in good enough health to be cross-examined by the time the delayed trial begins.

The statutory managers of Aorangi, Grant Thornton, requested the adjournment to complete "necessary legal and financial analysis" of the 5000 documents filed in relation to the hearing, Judge Chisholm said.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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