19 Sep 2008

NZ connection to merged British bank

7:18 am on 19 September 2008

Finance and property companies in New Zealand which have borrowed money from a subsidiary of Britain's biggest mortgage lender HBOS will be watching for the implications of its takeover by a rival bank.

Halifax Bank of Scotland, known as HBOS, whose shares plummeted recently amid concerns over the firm's future, has been taken over by rival Lloyds TSB, creating a $US50 billion company.

HBOS has lent about $1.5 billion to finance companies and property developers in New Zealand, through its corporate finance subsidiary BOS International, based in Sydney.

Among property companies it has lent to is Infinity, which is building the new town Pegasus in Christchurch.

Infinity says its $151 million funding line with BOS International is secure, and guaranteed until 2010. BOS International opened an office in Auckland in 2005.

Financial adviser Chris Lee says any move that will make HBOS a stronger organisation will be welcomed by the finance companies it deals with in New Zealand.

"Lloyds and Halifax Bank of Scotland are both in the top five trading banks in Britain, and you put those two together its a pretty formidable company."

Chris Lee says a tentative deal proposed between Strategic Finance and a consortium including an HBOS subsidiary may be strengthened.

The editor of interest.co.nz, Bernard Hickey, is not confident the bank's buyout is good news in New Zealand.

He says Lloyds TSB is a more conservative bank than HBOS, and may look to wind down the subsidiary that has lent money in New Zealand, by carrying out mortgagee sales.

"This is yet another withdrawal of funding from the property sector in New Zealand and is part of a global de-leveraging process, where debt which was pumped in at low prices over the last four or five years is pulled out by foreign investors.

Bernard Hickey says Strategic Finance, Geneva Finance and Dominion Finance are among the companies BOS International has lent to.