NZX ANNOUNCEMENT - FOR IMMEDIATE RELEASE
5 June 2013
PGC and Heartland Agree Exit Terms for Real Estate Credit
Pyne Gould Corporation ("PGC") announced today that its subsidiary Real
Estate Credit Limited ("RECL") has agreed terms to terminate its management
contract with Heartland New Zealand ("HNZ").This results in a one-off
increase in net profit after tax of approximately NZ$7.8m.
Background
At the formation of HNZ, PGC established RECL as a special purpose vehicle to
manage NZ$81m of legacy non-core real estate assets of HNZ. Terms were
agreed in a 5-year management agreement starting in January 2011 whereby RECL
agreed to compensate HNZ for up to NZ$30m of losses, payable in 2016 unless
realised earlier.
HNZ now wishes to internalise the management of its book and, therefore,
requested RECL agree to an early termination of the management contract. The
terms of this have been agreed and settled and RECL has paid HNZ the maximum
residual loss amount (which stands at NZ$26.75m) by immediately transferring
to HNZ assets charged to secure the compensation payment. The assets are: (1)
a Westpac bond due January 2016 with a face value of NZ$11m; and (2) loans
and property assets equal to the balance.
Outcome
The payment of the maximum residual loss amount means that neither RECL nor
PGC has any residual exposure to compensation to be paid to HNZ. Further,
the net outcome from RECL is that PGC will book a one-off net profit after
tax of NZ$7.8 million in the current reporting period. This arises, for the
material part, as RECL was paid an up-front fee of NZ$11m in 2011. This fee
was amortised over the five-year term of the arrangement. As the management
contract has terminated early, the upfront fee is no longer required to be
amortised and is, therefore, accounted for in the current year.
PGC
"The exit from RECL is a clean end to the substantial and wide-ranging
support provided by PGC in the rescue of Marac and creation of HNZ," said
PGC Managing Director George Kerr.
"On top of RECL and non-core real estate sales over the last year, PGC sold
or contracted to sell: HNZ, PGG Wrightsons, Perpetual Group, van Eyk and
Perpetual Trust. The RECL exit is another step towards the stated strategy
of an exit of all non -core assets and a pure focus on Torchlight."
PGC expect to make further announcements on regulatory approval being
obtained for the sale of Perpetual Trust.
For media enquiry contact
David Lewis +64-21-976 119
End CA:00237061 For:PGC Type:GENERAL Time:2013-06-05 10:59:22