HGH - Heartland Group Holdings

[winner69]

A cartoon from interest.co.nz yesterday (bastardised of course)

http://www.interest.co.nz/opinion/73...out-why-it-the

[winner69]

One of the features of the recent profit announcements of the big 4 banks increased profitability in nz was their being able to reduce impairment provisions, ie less bad and overdue debt.

Jeez, I hadn't factored that sort of stuff in to my Hnz profit forecast for this year

Heartland sure is in a sweet spot at the moment

[Beagle]

Sure are mate. Its been a big 3 weeks since the ASM with the SP up from $1.01 to $1.10. Market is starting to wake up to the official forecast being VERY conservative.

[Beagle]

KCF010 - Here's an example of what HNZ could do to bolster its ROE. Kiwibank issued capital notes that I presume meet the Reserve Bank's requirements for capital at 6.61%.
The current super low interest rate environment provides an ideal opportunity for HNZ to follow suit. Note this $100m tranche issued at 6.61% currently trades at well under 6%.
Looking through the NZDX market this morning there's nothing of substance there paying more than 6% so I reckon they could get a long term issue away, say $100m at very close to 6% and then do a buy-back of shares !! Get on to it I reckon.

P.S. Yes, confirmed to meet Basel 111 capital requirements, currently trading at only 5.75%.

Percy, you know management well, do you want to get on to sending them an e.mail and suggesting this.

Here's the original media release

GENERAL: KCF: Kiwi Capital Funding Limited announces Capital Note offer 08:57a.m.

KCF
05/05/2014 08:57
GENERAL

REL: 0857 HRS Kiwi Capital Funding Limited

GENERAL: KCF: Kiwi Capital Funding Limited announces Capital Note offer

MEDIA RELEASE

5 May 2014

KIWI CAPITAL FUNDING LIMITED ANNOUNCES CAPITAL NOTE OFFER

Kiwi Capital Funding Limited (KCFL) has today announced an offer of up to
$100 million of unsecured subordinated Capital Notes to the New Zealand
public. Proceeds of the offer of Capital Notes will be used to invest in
convertible subordinated bonds to be issued by Kiwibank (a related company of
KCFL), which will help Kiwibank meet its regulatory capital requirements
under the Reserve Bank's Basel III framework.

The Capital Notes have a maturity date of 15 July 2024 but may be called, if
certain conditions are met, by KCFL from 15 July 2019 and earlier for tax or
regulatory reasons. The Capital Notes have a credit rating of BB+ from
Standard & Poor's, reflecting their subordination and loss absorption
features.

Interest is scheduled to be paid semi-annually on the Capital Notes.* The
Margin and interest rate for the first five years until 15 July 2019 will be
set following a bookbuild on Wednesday 14 May 2014 and announced on or before
the Opening Date.

The Offer is expected to open on Thursday 15 May 2014 and close on Tuesday 3
June 2014 at 5pm. Interested investors should contact one of the Joint Lead
Managers to the offer (listed below) or their usual financial adviser to
request a copy of KCFL's Investment Statement for the Capital Notes.

HNZ don't need to re-invent the wheel here, just copy it at say 6.25% and I reckon a $100m offer would fly out the door.

[Harvey Specter]

Kiwibank has a higher credit rating and an implied govt guarantee (despite explicit statements from the govt) but I do agree. As their credit rating improves, as it has been, their cost of funds should drop, increasing their returns.

[percy]

KCF010 - Here's an example of what HNZ could do to bolster its ROE. Kiwibank issued capital notes that I presume meet the Reserve Bank's requirements for capital at 6.61%.
The current super low interest rate environment provides an ideal opportunity for HNZ to follow suit. Note this $100m tranche issued at 6.61% currently trades at well under 6%.
Looking through the NZDX market this morning there's nothing of substance there paying more than 6% so I reckon they could get a long term issue away, say $100m at very close to 6% and then do a buy-back of shares !! Get on to it I reckon.

P.S. Yes, confirmed to meet Basel 111 capital requirements, currently trading at only 5.75%.

Percy, you know management well, do you want to get on to sending them an e.mail and suggesting this.

Here's the original media release



HNZ don't need to re-invent the wheel here, just copy it at say 6.25% and I reckon a $100m offer would fly out the door.

I must have missed something?
Heartland pay under 5% for deposits.
They have a very high equity ratio.
They talk of a possible return of capital or a buy back.
So appear they do not require further capital.


HOWEVER I do expect they will renew or replace MTFHCs[perpetual bonds] when they takeover Motor Trade Finance.!!!! lol.

[Beagle]

I must have missed something?
Heartland pay under 5% for deposits.
They have a very high equity ratio.
They talk of a possible return of capital or a buy back.
So appear they do not require further capital.


HOWEVER I do expect they will renew or replace MTFHCs when they takeover Motor Trade Finance.!!!! lol.

Keeping a high capital ratio is important for an ever improving credit rating. One way of doing this is by issuing capital notes like Kiwibank's offer which is rated as capital in terms of the reserve banks capital adequacy ratio is concerned.
Issue capital notes at 6.25%, buy back 100m of shares and bingo you get a huge bounce in EPS in the remaining shares This sort of transaction would be seriously EPS accretive OR they could use some of the capital raised through the capital notes issue to fund other EPS accretive acquisitions or a combination of both.

One fly in the ointment as Harvey has pointed out is Kiwibank have a higher credit rating which enabled them to get this capital note issue filled. Perhaps HNZ needs to pay a little more than 6.61% or given that the Kiwibank issue now trades at 5.75% perhaps a capital notes issue at around 6.25-6.50% is now plausible ?

[winner69]

That Q1 disclosure thing put out this morning indicates healthy interest margins continue, maybe even higher than last year.

And they say home equity release Q1 profit after tax $1.2m - annual run rate $5m. But need to pump it up a bit for the acquisition to become eps accretive as promised and to get that 10% on the extra equity

[winner69]

Home equity release contributed $1.2m in Q1 ....lets say at least $5m for year

HNZ made $36m last ( little bit from her stuff) so adding the $5m to that gives $41m base for FY15

They try to kid us profit will be $42m ....so they only going to make $1m more in real terms

Done more than that in first quarter ....means going backwards for rest of year

Looks like a sell or that Jeff is really really having us all on.

[percy]

You may wish to sell,
however I find myself
"well positioned." !!!! lol.