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  1. #16
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    Quote Originally Posted by winner69 View Post
    Generally such things are not tax deductable

    has no cash consequence but affects the equity figure which can sometimes affect key ratios
    Yeah - my experience has been that goodwill amortisation is non-deductible. There may be exceptions I guess?

    Alan.

  2. #17
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    Enumerate: Thank you for your various detailed posts and your erudite analysis of the current position with NZF - a much superior assessment to what I have seen produced by our rather abysmal financial press, if I might say so. The recently-announced results are worthy of detailed study, and distinguish NZF from a large swathe of their lesser-endowed peers. I even bought a few more of the NZF010's, back in April.

    One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically? I suppose I could find out the answer, if I rooted around long enough, but I thought you might have it at your finger tips. (I tend to agree, though, that they might seek to roll over, and/or refinance elsewhere, rather than dilute the current ownership).

    LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.
    Last edited by COLIN; 01-06-2010 at 11:33 PM. Reason: Added postscript

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    Quote Originally Posted by invessi
    Enumerate, why do you prefer the Capitol Notes, is it because they may convert to shares at maturity?
    I do not believe that it is inevitable that the Capital Notes will be converted to shares. I do not think there is the necessity to massively dilute existing holders. The company is meeting the interest payments ... and is showing an operational profit. It is out of the retail deposit government guarantee scheme - which is a good thing in my view - and will maintain it's margin on lending with source funding from it's bank partners.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  4. #19
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    Quote Originally Posted by COLIN
    One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically?
    It is a classic discounted VWAP calculation: 95% of the weighted average of the shares traded 20 business days before the test date.

    Oops, you have done the research ...

    Quote Originally Posted by COLIN
    LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.
    Another reason to have a little stockpile of shares bought cheaply ...
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  5. #20
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    Quote Originally Posted by winner69
    Generally such things are not tax deductable
    has no cash consequence but affects the equity figure which can sometimes affect key ratios
    I think there is a difference between the new IFRS requirements to report values based on fair value (for example, goodwill) and not to allow internally generated goodwill to be recognised. Since this is goodwill associated with a part owned investment asset (MPM) and not an internal, wholly owned, element - I'd say that there is the possibility of the write down having tax implications (for the positive, in the case of a write down).

    Further, given this occurs at an annual review of asset values - I think this may be the correct interpretation. All will be revealed when we see the full accounts.

    I think that under the old NZ GAAP - it was possible to slowly amortise this goodwill. I do agree with the point that concern about equity levels and triggering banking covenants, etc. may be something to carefully investigate.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  6. #21
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    Quote Originally Posted by COLIN View Post
    Enumerate: Thank you for your various detailed posts and your erudite analysis of the current position with NZF - a much superior assessment to what I have seen produced by our rather abysmal financial press, if I might say so. The recently-announced results are worthy of detailed study, and distinguish NZF from a large swathe of their lesser-endowed peers. I even bought a few more of the NZF010's, back in April.

    One query I would have, in regard to what might happen on maturity of the notes, relates to the manner of arriving at the "market price of the NZF's" if they choose to convert to shares, given that these shares are only traded very spasmodically? I suppose I could find out the answer, if I rooted around long enough, but I thought you might have it at your finger tips. (I tend to agree, though, that they might seek to roll over, and/or refinance elsewhere, rather than dilute the current ownership).

    LATER: I have now done the legwork, relative to my query, and consulted the Trust Deed. It states that the conversion price is to be 95% of the weighted average share price over the previous 20 business days. If there have been no transactions on the NZX over this period then the "last sale price prior to that period" is the operative price. It seems to me that this formula leaves the conversion price wide open to manipulation, where we have such an extremely thinly-traded share.
    The shares in NZF are tightly held which creates its own problems, an increase in shareholders could be a good thing! A merger or takeover of a like company could also be a good thing!

    NZF are going to roll out a comprehensive range of insurance products shortly of which they are the underwriter of premiums, this could go well for them given that they have built in distribution through Mike Pero brokers/insurance writers and the brokers/insurance writers who agregate through NZF. The other advantage they have is that a lot of general insurance writers are either retiring or not wishing to go through the new education process, this should widen the market for NZF.

  7. #22
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    BTW - I looked at last years accounts filed at the Companies Office (still waiting for this years). The Goodwill changes were recorded on the income statement - which is good news for the use of the write down to offset tax, in my view.

    Invessi, you point out the insurance product diversification ...

    Quote Originally Posted by Invessi
    NZF are going to roll out a comprehensive range of insurance products shortly of which they are the underwriter of premiums, this could go well for them given that they have built in distribution through Mike Pero brokers/insurance writers and the brokers/insurance writers who agregate through NZF. The other advantage they have is that a lot of general insurance writers are either retiring or not wishing to go through the new education process, this should widen the market for NZF.
    This is important news ... to me it speaks of a a company willing to invest in the NZ financial services sector and to innovate (cf the recent Residental Mortgage Backed Securities issue). I think your point about other companies retreating from the market also applies to a wider set of financial services. If they can sort the capitalisation issues - the future should be very bright.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  8. #23
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    Quote Originally Posted by Enumerate View Post
    BTW - I looked at last years accounts filed at the Companies Office (still waiting for this years). The Goodwill changes were recorded on the income statement - which is good news for the use of the write down to offset tax, in my view.

    Invessi, you point out the insurance product diversification ...



    This is important news ... to me it speaks of a a company willing to invest in the NZ financial services sector and to innovate (cf the recent Residental Mortgage Backed Securities issue). I think your point about other companies retreating from the market also applies to a wider set of financial services. If they can sort the capitalisation issues - the future should be very bright.
    This is the person who heads up the new insurance program -

    Dave Shatford Dip P Fin Plan(Waikato) Ė General Manager Investments and Insurance
    Dave moved to his current role in July 2007 from GM Distribution for NZF mortgage and insurance broking division New Zealand Mortgage Finance Limited (NZMF). Dave has a wealth of experience in investments and insurance from the 32 plus years he spent in the financial services industry. His specialist insurance knowledge came from his senior management roles at Aon (where he ran Aonís life insurance distribution area) and before this AMP, where he was in the life insurance business development area, his last role being National Manager Broker Distribution. Prior to this he spent over ten years in ANZ Bankís funds management division, initially in administration and marketing management roles, prior to going abroad for an extended period. On his return to New Zealand in 1993 he was appointed as a Financial Planner with ANZ Funds Management and later as ANZís Financial Planning Manager; in charge of systems, audit, training and development of ANZís Investment Advisory Service and personnel. Dave joined NZF when Approved Mortgage Brokers Limited (where Dave was CEO and part owner) merged with NZF subsidiary NZMF. Dave started his career with the ANZ in 1977, where he held a number of senior and managerial roles over the 23 years he worked there, including residential and commercial lending, credit control, marketing, administration, investment and insurance.

  9. #24
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    I would be very surprised if amortisation of goodwill was deductible for tax. What i think you have been looking at are the company accounts not the tax accounts. In company accounts goodwill etc is normally expensed over say 10 years in the operating accounts but wil not be in the tax accounts. This would suggest that the company accounts understate tax due. There may be a tax reconciliation somewhere which take the company Profits, adjusts for all these sort of items, and comes up with actual tax payable.

  10. #25
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    NZF
    15/06/2010
    GENERAL

    REL: 1417 HRS NZF Group Limited

    GENERAL: NZF: NZF closes its inaugural NZ$100m issue

    15 June 2010

    NZF Group (NZF) closes its inaugural NZ$100m issue of New Zealand residential
    mortgage backed securities (RMBS).

    NZF Mortgages Series 2010-1 Trust, arranged and lead managed by Westpac, is
    NZF's first RMBS transaction and the first RMBS transaction in New Zealand
    since 2007.

    Details of the notes are:

    Note Class Issue Amount (NZ$m) Rating (S&P) Estimated WAL (Yrs) Pricing (3m
    BKBM Bid +)
    A1 87.8 AAA 2.7 175
    A2 9.1 AAA 2.7 260
    B 2.5 AA- 5.0 Undisclosed
    C 0.6 NR 5.0 Undisclosed

    The transaction was built around strong reverse enquiry from a small group of
    institutional investors. NZF have retained a portion of the notes to support
    the transaction.

    The notes are pass-through securities that will be repaid as (borrowers make
    principal payments on their mortgages/the trust receives principal from the
    underlying borrowers). The transaction is therefore a key fundi
    ng tool for
    NZF, allowing the duration of funding to be aligned to that of the underlying
    mortgage loans.

    The transaction further diversifies NZF's funding base and frees up NZ$100m
    for future loan origination.

    The notes are backed by mortgage loans to 348 borrowers, secured by 403
    properties that are located in New Zealand. All loans benefit from mortgage
    insurance provided by Genworth Financial Mortgage Insurance Pty Limited.

    Key characteristics of the loan pool include:
    - weighted average loan size of $286k
    - weighted average seasoning of 28.9 months
    - weighted average loan to value ratio (LVR) of 73.4%
    - 73.4% principal and interest
    - 64.5% fixed rate
    - 41.8% low documentation loans to self employed borrowers.

    ENDS

    For more information please contact:
    John Callaghan Tel (09) 520 9350 or 021 346 262.

    Malcolm Lindeque
    For and on behalf of the board of directors
    Company Secretary
    NZF Group Limited
    End CA:00196126 For:NZF Type:GENERAL Time:2010-06-15:14:17:11

  11. #26
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    This is very good news. It means that NZF can write mortgage business in $100million dollar blocks and fund this through ready demand in the wholesale market.

    I note the BNZ has issued $425million of covered bonds - also with an AAA rating:

    http://www.nbr.co.nz/article/bank-ne...d-bonds-124620

    I think this development is really very good. Rather than fund the NZ mortgage market at junk levels through the carry trade more power to NZF to package the high quality debt in a manner that allows Banks and Financial institutions to treat it as Tier-1 capital.

    NZF is innovating. Further, I think we can look for stellar performance from this company as the recovery strengthens.

    It seems absurd that the NZF010s trade at the same level as the SCF010s. I suppose people are worried about conversion into NZF shares. However, I think the RMBS deal means that it would be highly unlikely NZF would choose to issue heavily discounted shares in satisfaction of the maturing NZF010s.
    Last edited by Enumerate; 16-06-2010 at 08:20 AM.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  12. #27
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    NZF Group's $100 million residential mortgage backed securities offer has closed, with institutional investors' strong interest encouraging the financial services firm to aim for another issue later this year.

    NZF Group's offer of the securities was the first of its kind in New Zealand since 2007. The $100m offer includes $87.8m of AAA-rated notes, backed by a package of 403 properties and mortgage loans to 348 borrowers.

    Managing director John Callaghan would not name the investors who bought the notes, but said residential mortgage backed securities (RMBS) were in demand from institutional investors. "There are investors looking for AAA products and quality RMBS. This offer is really about re-establishing the RMBS market in New Zealand."

    NZF Group's offer was a "plain vanilla mortgage book offer" that was easy for investors to understand. RMBS had fared well in both New Zealand and Australia during difficult economic conditions, he said.

    The offer's non-rated and AA- rated notes were held by NZF Group as the firm still had an interest in this type of product, he said.

    NZF Group provides a range of financial services including home loans, consumer loans and debentures. It is also half-owner of Mike Pero Mortgages with Australian specialty finance group Liberty Financial.

    NZF Group, formerly New Zealand Financial Holdings, posted a $4.6m March year loss, writing off close to $7m on its Mike Pero investment. This came after ratings agency Standard & Poor's assigned NZF Group subsidiary NZF Money a B rating for both its short and long-term debt in February, citing its "weakly capitalised parent".

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    Quote Originally Posted by Enumerate View Post
    This is very good news. It means that NZF can write mortgage business in $100million dollar blocks and fund this through ready demand in the wholesale market.

    I note the BNZ has issued $425million of covered bonds - also with an AAA rating:

    http://www.nbr.co.nz/article/bank-ne...d-bonds-124620

    I think this development is really very good. Rather than fund the NZ mortgage market at junk levels through the carry trade more power to NZF to package the high quality debt in a manner that allows Banks and Financial institutions to treat it as Tier-1 capital.

    NZF is innovating. Further, I think we can look for stellar performance from this company as the recovery strengthens.

    It seems absurd that the NZF010s trade at the same level as the SCF010s. I suppose people are worried about conversion into NZF shares. However, I think the RMBS deal means that it would be highly unlikely NZF would choose to issue heavily discounted shares in satisfaction of the maturing NZF010s.
    Bought another 30k today, at 57%. I think its a steal. Unfortunately someone else beat me to the 30k which was offered at 60% - was that you, Enumerate?

  14. #29
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    Quote Originally Posted by COLIN
    - was that you, Enumerate?
    Too slow ... I rely on the ASX to be open for liquidity.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

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    This was posted today on the Bob Day website "He said the notes were backed by mortgage loans to 348 borrowers, secured by 403 New Zealand properties. All loans had mortgage insurance from Genworth Financial Mortgage Insurance Pty Ltd."

    I noted in an earlier post on this blog that Tower insure the NZF Group Mortgages, please note that Genworth were the primary insurer but Tower are the insurer going forward, I would expect primarily because Tower are behind the new NZF insurance products for brokers to distribute initiative!

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