Heartland buys equity release business

New Zealand’s newest bank is tospend almost $90 million buying a reverse mortgage business.

Friday, February 14th 2014, 2:10PM

Heartland New Zealand will pay $87 million in cash and shares and will raise $20 million from shareholders.

It gained its banking licence just over a year ago.

Reverse mortgages, or home equity release schemes, allow people to borrow money against the equity in their homes.

Heartland’s agreement is with Seniors Money International, majority owned by Quadrant Private Equity. It covers businesses on both sides of the Tasman.

It will acquire Sentinel New Zealand, and its 4050 loans, and Australian Seniors Finance.

The sale is conditional and will settle on April 1.

Heartland advised the NZX it would raise $20 million for the acquisition. The capital raising comprises a $15 million equity placement and a $5 million share purchase plan.

Each Heartland shareholder with an address in New Zealand will be eligible to invest up to $15,000 in new Heartland shares.

Heartland told investors that its costs were normalising, there was consistent growth in earnings and the organisation was poised for growth.

“The home equity release loan product caters for an aging population with much of its wealth invested in real estate. As a result of the acquisition, Heartland is well placed to take advantage of the compelling sector fundamentals," it said.

It said the product was a timely response to the demographic changes of an ageing population. “The ability to monetise these assets without the need to sell and exit the family home or to demonstrate external sources of debt servicing allows seniors to remain independent and to age with dignity in their own homes.”

No payments are made while the borrower occupies the property and the borrower never has to repay more than the value of the property.

The acquired businesses will sit outside Heartland Bank. Over time, the existing NZ loans will be migrated on to the bank’s balance sheet, with new loans written directly by Heartland.

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