Deal on track, says Strategic Finance

Srategic Finance's buyout plan is on track, despite a sudden plunge in the shares of supporting banker HBOS.

Shares in Halifax Bank of Scotland, Britain's biggest mortgage lender, fell as much as 60 per cent on the London Stock Exchange in the wake of the Lehman Brothers bankruptcy and amid fears of further market turmoil. The shares later rebounded, but were still down a third of their value yesterday.

Late last night the BBC reported that HBOS was in advanced merger talks with Lloyds TSB to create a giant UK super retail bank..

The dealwould end the uncertainty about the strength of HBOS raising its share value closer to its closing price last week of 300 pence rather than its current level of around 100p, the BBC said.

A consortium of former owners and current managers of Strategic, backed by HBOS, confirmed a deal to buy Strategic from ailing parent Allco Hit at the start of September.

Strategic chief executive Kerry Finnigan said yesterday that they had heard "nothing that would give us an indication that the transaction is at risk or not likely to proceed".

HBOS was one of the top banks in the world and the share price did not necessarily reflect what the bank's assets were worth, he said. "They are a very strong bank and well positioned. At the moment, we are looking forward to the relationship with them and we have heard nothing to suggest the transaction is at risk."

HBOS, parent company of Halifax and the Bank of Scotland, has come under pressure about whether it can refinance its debt of more than 100 million (NZ$280.34 million) in coming months.

The company said yesterday it was able to raise money.

Mr Finnigan said it was disappointing that what was going on globally was so dramatic, and it was having a ripple effect, including in Australia and New Zealand. "That just compounds investor nervousness, which is why you are seeing prices off to that extent."

Last month, Strategic suspended redemptions to 14,000 investors who are owed about $300 million. Investors had been due to get interest payments last Monday for debenture stock, subordinated notes and deposits. The Strategic board also decided not to pay the next dividend due on perpetual preference shares due on October 15.

The management buyback was conditional on a capital restructure of Strategic Finance involving new funds from the consortium and extra funding lines provided by BOS International.

BOS International would lift its existing debt facilities to Strategic from $100 million to $150 million.

Strategic reported a $15.59 million loss for the year to June, a hefty turnaround from a $28.4 million profit in the previous year.

- With AP

- © Fairfax NZ News