Rural Bank sale ‘terrifies’ lobby groups

Press, 5 August 1988, Page 3

Rural Bank sale ‘terrifies’ lobby groups

By

GLEN PERKINSON

Legislation hastening the sale of up to $3 billion of Rural Bank assets has incensed and terrified agricultural lobby groups.

The legislation, passed late last Friday evening, has dissolved the bank’s six-member board and. prompted fears that the mortgages and security of thousands of New Zealand farmers will be sold to overseas investors.

Farmer groups and the bank’s chairman concur that either the bank’s mortgages or the entire bank is soon to be sold to the highest bidder.

The Government stands to make at least $2.5 billion from the impending sales. Both Federated Farmers and a splinter group formed early last year, the Provincial Support Group, said farmers were "alarmed” and “terrified” at the move. The Minister for StateOwned Enterprises, Mr Prebble, was not able to be reached for comment last evening. He is believed to have met the Minister of Finance, Mr Douglas, and the Minister of Agriculture, Mr Moyle.

Mr Prebble said on Budget night that the commercially viable parts of the Rural Bank were for sale.

The bank’s chairman, Mr Peter Kemp, said yesterday that offers had been received for many of the bank’s mortgages, but signals from prospective purchasers so far were that “roughies” or bad mortgages were not wanted.

Although he would not reveal the number of offers the bank had had, or where from, Mr Kemp said that within 10 days the new directors of the bank would meet to decide the best sale.

They will be appointed by Mr Douglas, who has retained Mr Kemp as chairman.

Mr Kemp hoped the bank could be sold "lock, stock and barrel” rather than in bundles of mortgages.

“If we were forced to sell mortgages in bundles to other banks we would be left with a rump that nobody wants. Most offers so far have been for mortgages With good equity,” he said.

The bank’s general manager, Mr Ray Chappell, said the bank considered that about 90 per cent of its mortgages had

good equity — that is, about $2.5 billion of Rural Bank-held loans.

But Mr Collis Blake, leader of the Provincial Support Group, said as many as 50 per cent of farmers who had money on loan from the bank were in trouble. Private institutions would either not want these mortgages or would ensure the farms were sold immediately.

He was scared the bank’s open-ended mortgages could spell the end for hundreds of farmers. The bank could call up mortgages at will, change interest rates at its pleasure and seize any asset, not just those used as security, to settle debts.

“Farmers will be shattered, devastated and terrified at this move that could see them off their land in seconds flat,” Mr Blake said.

He knew of several farmers in Canterbury, Manawatu and Hawke’s Bay who had been sold up by creditors in hours, even minutes. These were the organisations vying for the bank.