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Higher interest rates mean the "flight to quality" following the Bridgecorp collapse will hit finance companies harder than the three failures last year, says finance group St Laurence.
Bridgecorp's receivership has sparked fears that other finance companies will suffer a squeeze on funding as investors divert money to safer havens such as top tier finance firms and banks, as was seen following the collapse of Provincial Finance, National Finance 2000 and Western Bay Finance last year.
In the wake of Bridgecorp's collapse early this month owing investors $500 million - more than last year's three failures combined - there were now signs that was happening, St Laurence general manager of funding Helen Mexted said yesterday.
"We believe that there's a flight to quality happening in the marketplace but our funding levels have held up pretty well. We haven't seen any impact on our new business.
"Reinvestments have dropped slightly but it's too early to see what the impact will be."
St Laurence managing director Kevin Podmore said Reserve Bank interest rate increases this year meant banks' deposit rates were now more competitive and therefore they would likely snag a greater share of the funds taken out of finance companies.
Despite that, he was confident St Laurence, which has $270 million in debentures on issue, would ride out the storm generated by Bridgecorp's collapse.
The company, which gets most of its debenture funding through financial advisers, was still receiving about $1 million a month in new money and had about $40 million in cash reserves which would see it through any short-term funding squeeze.
In any case St Laurence was likely to require less growth in funding in the immediate future.
"One of the other issues is what do you do with the money you raise? Things are quietening down a little bit, certainly in the property sector, so we've got less opportunities. In some ways we may not necessarily want the growth we've had in the past."
John Crone, general manager of St Laurence's listed subsidiary National Property Trust, said suitable opportunities to grow by acquisition were becoming scarce.
The trust, which was having to compete with local rivals and overseas buyers who often had a much lower cost of capital, would instead focus on adding value to its existing portfolio of mostly office and retail property.
Podmore said St Laurence had not lost money in the Bridgecorp collapse and did not expect to. St Laurence has a loan to a joint venture property development in which Bridgecorp was a partner, but that project was progressing satisfactorily.
