Pyne Gould Corporation may be swinging back into profitability, but there is still the small matter of $90 million of toxic loans sitting on its books to consider. While there will be the usual interest in the South Island-based finance company's bottom l
Pyne Gould Corporation may be swinging back into profitability, but there is still the small matter of $90 million of toxic loans sitting on its books to consider.
While there will be the usual interest in the South Island-based finance company’s bottom line when it reports its interim results tomorrow, it’s the dodgy loans hanging over its head that still needs to be acknowledged.
The company has shifted around the full $175 million in property development loans between its subsidiaries and ate an $85 million write-down on the loans in its 2009 earnings.
That saw it post a $54.4 million loss for the full 2009, but in its prospectus for its capital raising, it forecast a $22.2 million profit for 2010.
That forecast was made in September, and the lack of any further earnings update from the company since then suggests it is on target to meet that goal.
Pyne Gould Corp has had its hands full dealing with a board search that took longer than expected and the unexpected disappearance of a senior staff member.
It has also revealed an irregularity in Marac’s loan book that dated back to 2003, something which may be acknowledged tomorrow, with the company refusing to comment any further until the half year result.
Tomorrow’s announcement may also include an update on Pyne Gould Corp’s plan to turn Marac into a bank. With the capital raising complete and the boards only requiring shareholder consent to be completely settled, the company is set to take the next step towards becoming a bank.
But there is still the little issue of the $90 million in loans left after the $85 million write-off. They are currently owned by Real Estate Credit, a wholly-owned subsidiary of Perpetual Asset Management, but it all comes back to the parent.
There is still the chance the loans could pay off, but they are nothing to count on. They are not going to go away and may need to be permanently dealt with before that bank can truly take shape.
