MERCHANT BANKING APPROVAL IN N.Z.

Press, Volume CXII, Issue 32847, 22 February 1972, Page 1

MERCHANT BANKING APPROVAL IN N.Z.

(New Zealand Press Association) WELLINGTON, February 21. Consent has been given to the formation of four companies, with local partners, to function in the merchant banking field in New Zealand, the Minister of Finance (Mr Muldoon) said today.

Outlining progress that was being made to increase the flow of overseas capital into New Zealand, Mr Muldoon said that the Government, through the Reserve Bank, had also indicated to two other merchant banking groups that their initial proposals were acceptable and it was likely to consent to firm proposals when these were submitted.

The four companies which have been allowed to open in New Zealand are:

Chase-N.B.A. New Zealand Group, Ltd, which has Chase-N.B.A. Group, Ltd, of Melbourne, and Gen-

eral Finance, Ltd, as major shareholders.

N.Z. Unitec Corporation, Ltd, an existing New Zealand company, which is to increase its share capital and admit Barclays International, Ltd, and Bamerical International Financial Corporation (a subsidiary of the Bank of America) to the recon-

stituted company. South Pacific Merchant Finance, Ltd, which will have shares held by the National Bank of New Zealand, Ltd, South British Insurance Company, Ltd, R. A. Jarden and Company, Ltd, Lloyds and Bolsa International Bank, Ltd, and Tras City, Ltd, of Aus-

tralia. Broadbank Corporation, Ltd, a member of the Broadlands Dominion Group, with Wells Fargo International Corporation as a minority shareholder.

Mr Muldoon said that the Government did not intend to agree to the establishment of a large number of merchant banking companies with substantially overseas owners, and it would _ not give approval to additional entrants unless the proposals clearly indicated that they would materially benefit the New Zealand economy. The targets advisory group of the National Development Council estimated that a substantial capital inflow was needed to augment domestic savings over the next 10 years if New Zealand was to reach the desired level of capital investment, Mr Muldoon said. The Government decided to allow overseas companies to participate in the establishment of merchant banks in New Zealand. “The overseas companies must be joined by New Zealand partners holding the predominant portion of the share capital of the venture,” he said. “In the initial stages, however, some flexibility will be allowed and the overseas investors will be permitted to hold a predominant share in the first few years provided a move to majority New Zealand ownership is made within a reasonable time. WIDE RANGE

"Merchant banking covers a wide range of financial and investment services, some of which are already handled by existing organisations. “However, to be effective as units which encourage and organise overseas investment in New Zealand, the merchant banks should be active in a number of financial fields,” said Mr Muldoon.

“They may be involved in portfolio and investment management, underwriting and sub-underwriting local new capital issues, they may deal in short-term commer-

cial bills, engage in leasing finance, provide financial and investment services and the raising of loan funds, especially medium and longer-term loans for client companies from internal as well as external sources.

“Their particular field and that of the Development Finance Corporation will be the bringing together and financing of enterprises which will assist in broadening the base of the New Zealand economy.

“The Government, in deciding whether the proposals submitted to the Reserve Bank were acceptable, has been careful to ensure that the entry of overseas partners will provide expertise and is likely materially to assist in the inflow of foreign investment funds needed to achieve the N.D.C. targets,” said Mr Muldoon. He said that the other important injection of overseas capital came in the form of a SNZ7m loan from the World Bank to the Development Finance Corporation. The corporation would lend this money to meet the import content of development projects in New Zealand. It was also hoped that in due course a further loan would be available to the corporation from the World Bank.

“Although the World Bank does not usually lend to economically advanced countries it has recognised the need for New Zealand to develop and restructure its industry more rapidly that at present so as to cope with changes likely to be brought about by Britain’s entry to the E.E.C. With this increase in its resources, the D.F.C. will play an increasingly significant role in the financing of industry,” Mr Muldoon said.