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F&P Finance mulls future of Equipment Finance unit after year of restructuring

01 Apr 15

Fisher & Paykel Finance, the finance company owned by China's Haier Group, may transfer its Equipment Finance Ltd (EFL) unit to its immediate parent in a further restructuring of the charging group after changes including the start of a securitisation programme last year.

The proposal to move EFL, whose receivables were valued at $25.9 million at Dec. 31, outside of the company's charging group is detailed in the prospectus for the sale of up to $300 million of secured deposits. The charging group is the company's non-bank deposit taker.

EFL, which offers finance for plant, machinery and business equipment, has more than 13,000 business clients and partnerships with more than 250 diverse equipment dealers in New Zealand, according to its website.

Haier acquired F&P Finance as part of its takeover of F&P Appliances in 2012. The Chinese manufacturer opted to retain the finance company after initially considering it for sale. In calendar 2014, following a change of balance date, F&P Finance reported net interest income of $35.5 million from $33.4 million in the year-earlier nine months. Profit almost tripled to $31.8 million, helped by a revaluation gain on the transfer of a subsidiary.

In 2014, a strategic review of the company concluded it would benefit from a more diversified funding base and restructuring. As a result, it established a securitisation programme last August under which it made an initial sale of $275 million of receivables from its Q Card to Q Card Trust, owned by immediate parent F&P Finance Holdings.

F&P Finance also 'sold' its Consumer Insurance Services unit, which offers insurance and product protection policies to retailers and consumers, to parent F&P Finance Holdings for $20.1 million in December. The charging group's software and intangible assets were also sold to the parent for $7.3 million. And in a note on post-balance date events, accounts payable and payroll processing was transferred in the same way.

According to the prospectus, the company's shareholder has approved the release of EFL from the charging group provided it is done by June 30 next year. It said the impact of the EFL release on the business of the charging group "would depend on a number of factors including the manner in which any such EFL release is undertaken."

Company executives weren't immediately available to comment on the changes.

F&P Finance is rated BB+ by Standard & Poor's, which is one notch below an investment grade rating. S&P revised the outlook to negative from stable in December, reflecting the potential for a downturn in the New Zealand economy that could weigh on the financial services sector.

S&P said F&P Finance has a "concentrated product line providing consumer card services to lower-to-middle socio-economic clientele in New Zealand." Its main product was its Q Card, a consumer card service with a network spanning more than 10,000 retail outlets and more than 148,000 active customers.

The ratings company said that "higher growth plans are in place for the company's equipment leasing arm that should improve business diversification over time." Equipment leasing made up about 15 percent of net receivables at Sept. 30 last year.

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