United gets $US100M credit

Press, 13 October 1987, Page 26

United gets $US100M credit

By

MARK REYNOLDS

The United Budding Society has arranged an offshore line of credit for SUSIOO million.

The three-year Euronote facility, believed to be the first arranged by a New Zealand building society, is at an Interest rate of only 0.25 per cent above LIBOR the interest charged by London banks on loans among themselves. It is set daily in London and at present is about 8 per cent While this may sound like a boon for New Zealand home finance borrowers, it will not necessarily be so. The issue will have to be changed to New Zealand dollars.

Mr Tony Kunowski, of Christchurch, United’s assistant general mana-

ger, corporate affairs, said in Wellington yesterday that the currency change over would nullify any advantages of the interest rate.

“To avoid foreign exchange exposure we have to buy New Zealand dollars, and the cost of this brings the rate back to about the current New Zealand rate.” Mr Kunowski said United’s lending rate was unlikely to fall in the immediate future because of the note issue. But it was reasonable to expect that the society’s rates would become increasingly competitive, Mr Kunowski said. He added that when the bank bill rate comes down interest rates will become cheaper. (The bank bill rate is the rate at which United borrows from New Zealand banks.) Home borrowers may think United has available an additional SUSIOO million. However, United does not intend to use it all at once. “It is something we can draw on when we need it” Mr Kunowski said.

The primary reason for obtaining the facility was neither the interest rate nor that United was short of funds, he said. “It is an access thing. It is like an international overdraft” New Zealand liquidity was very tight at times, and United had to be ready for these, Mr Kunowski said. The facility has been* underwritten to SUS6O million by 13 international banks, including Dai-ichi Kangyo, of Japan, the - Italian International Bank, and Credit Lyonnaise, of France. Mr Kunowski said the support United had received from the banks was a testimony to the “unusually good security

that United residential mortgage assets represented internationally.”

Unlike the position in the United States, New Zealand home mortgages are not Government guaranteed, so why are United mortgage agreements held in such regard?

Mr Kunowski attributes this to Allied Mortgage Guarantee, a subsidiary.

“This company guarantees payment on default of any mortgage agreement United makes. Allied in turn is insured against any defaulting mortgager.” Tht$USlOOM facility marked the first phase of a long-term financing strategy recently approved by United, Mr Kunowski said.