KEY POINTS:
Geneva Finance is understood to have ceased making new loans.
Finance industry sources said the freeze on new loans was effective from yesterday.
The Business Herald understands Geneva sees this as a temporary move to ensure liquidity during a difficult period for the industry.
Geneva mainly offers hire purchase for consumer goods and cars, personal and small business loans.
Geneva chief executive Shaun Riley refused to either confirm or deny the lending freeze.
"We're doing a number of things at the moment," he said.
"We will continue to prudently manage our lending and business activities in line with current market conditions and continue to adapt and shape our business in line with this changing market."
Riley said Geneva was meeting all the covenants on its trust deed and its banking facilities.Geneva has a $50 million line of credit from the Royal Bank of Scotland.
Last month ratings agency Standard & Poor's placed the company on "CreditWatch negative", indicating there was a 50/50 chance its B+ rating would be downgraded over the following three months. S&P credit analyst Derryl D'silva said there was a possibility that current financial market disruptions might lead to Geneva being unable to manage liquidity and funding pressures.
"Geneva's ability to continue to draw down on this facility and more generally maintain support from its bankers are the most important rating factors in the short term," said D'silva.
Since Rod Petricevic's Bridgecorp toppled in July, investors have been withdrawing millions from the $12 billion finance company debenture market. Further failures have seen the pace of those withdrawals increase, with commentators saying that even well-managed companies are facing risks because they cannot maintain liquidity to meet their commitments as debentures mature.
Last month Riley told the Business Herald the Royal Bank of Scotland facility had been obtained in 2006 to see the company through the type of scenario now unfolding. While the company had drawn down on the facility in recent weeks, he said it still had significant remaining capacity to fund its operations for some time yet.
He also said the company was talking to investors to reassure them their money was safe and it had reined in lending activity.
At the end of March Geneva had secured stock of $17.5 million, debentures of $112.7 million, unsecured deposits of $8 million and loans totalling $171.2 million. Geneva is owned by Finance Investments Holdings, which in turn is 85 per cent owned by Auckland property developers Peter Francis, Gary Hitchcock and Nigel Burton.
