Viaduct hikes deposit rates, plays down loss of govt guarantee

Nick Wevers

Viaduct Capital announced this morning that it had amended its prospectus and raised interest rates for deposits following the withdrawal of its Crown Guarantee by Treasury last week.

Viaduct owner Nick Wevers said that he was "surprised" at Treasury's decision to take the government guarantee away from the company. However, the guarantee would still cover all deposits made before April 20, Treasury said.

"We believe the Crown Guarantee was only a temporary measure to support the finance industry through a difficult phase," Wevers said in a statement.

"The company is now pleased to reflect the cost of the guarantee by offering investors what it considers to be more competitive interest rates," Wevers said. Viaduct more than doubled its one year deposit rate from 5 per cent to 10.25 per cent, raised its 18 month rate to 10.45 per cent, and put up longer term rates to 10 per cent.

Treasury said it had withdrawn the guarantee because it thought "the business or affairs of Viaduct are being, or are intended or likely to be, carried on in a manner which: may extend the effective benefit of the Crown Guarantee to persons who are not intended to receive that benefit; and is otherwise inconsistent with the intentions of the Crown in entering into the Guarantee."

Wevers said Viaduct believed "a part of the reason Treasury withdrew the Guarantee was because it didn't like the idea of a small finance company becoming a large one using the guarantee to do so."

"Furthermore, we think Treasury has misunderstood our business model," Wevers said.

Treasury said it would not respond to Wever's comments because of commercial and legal considerations.

Wevers said that Viaduct was focussed on lending "secured over property and to businesses seeking to improve their cash flow."

"Property lending is in the form of either purchasing existing loans from other lenders at a discount, new loans over assets at current market valuations or loans where the company can enjoy an enhanced security decision," Wevers said.

"Market sentiment is changing. We see excellent business opportunities now current market conditions reflect the readjustment of asset values," he said.

Formerly Priority Finance, the company was renamed Viaduct Capital when it was bought by ex Blue Chip CEO Wevers in February. It initially offered a prospectus to raise NZ$50 million from the public.

- INTEREST.CO.NZ