Float of UDC Finance proposed by ANZ

A float of finance company UDC is under consideration by its owner ANZ Bank after its attempt to sell it to China’s HNA Group failed last year.

In a statement to the NZX, ANZ said it would “explore the possibility” of an IPO of ordinary shares in UDC as one of several strategic options for UDC’s future.

UDC provides asset finance for a range of industries, including transport, agriculture and manufacturing.

For the year to December UDC reported a net profit of $61.6 million from net loans and advances of $2.9 billion.

Net equity at balance date was $485.6 million.

ANZ’s New Zealand chief executive David Hisco said the bank had been considering strategic options for UDC for some time as part of its goal to simplify the bank and improve capital efficiency.

“While UDC is continuing to perform well and there is no immediate requirement to make decisions, after last year’s planned sale to HNA did not proceed it makes sense to keep examining a broad range of options for UDC’s future.

“This will include exploring whether, subject to market conditions, an IPO would be in the interests of UDC’s staff and customers and ANZ shareholders.

“The range of strategic options we have for UDC, including approaches we have received about the business and the option of retaining it, will take a number of months to examine before any decision is made. In the meantime, it will continue to be business as usual for UDC.”

ANZ announced the planned sale of UDC to HNA for $660 million in January last year, with the deal due to complete later the same year.

However, HNA’s heavy debt position and opaque structure raised doubts about its ability to complete. Ratings agency Standard & Poor’s said it would downgrade UDC’s credit rating to BB- if the transaction went ahead, citing concerns about HNA’s funding and liquidity.

In December the Overseas Investment Office declined approval for the purchase, saying it could not tell who really owned HNA.

“The OIO did not determine who the relevant overseas person was from the information provided about ownership and control interests. The OIO was therefore not satisfied that the test in section 18 of the Overseas Investment Act 2005 was met,” it said.

The HNA sale price of $660m represented a price-to-book ratio of 1.6 times net assets of $424m as of September 2016.

A similar multiple of net assets as of September 2017 would indicate a valuation of $777m.  

Last year ANZ made preparations to replace UDC’s debenture stock with its own funding as part of the transition to HNA ownership. However, the deal’s failure leaves the UDC debenture programme intact.

As of September last year UDC funding comprised $1 billion of secured debenture stock and $1.4b from a committed credit facility with ANZ.

The amount of finance available under the committed credit facility was increased to $2.7b in November.

An ANZ spokesman declined to comment on how UDC’s funding would be affected by an IPO.