PGC not worried by loan inquiry

Last updated 05:00 27/11/2013

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Investment firm Pyne Gould Corporation does not consider that an 18-month-old investigation by the Financial Markets Authority into some of its loans will hurt its bid to list on the London Stock Exchange.

PGC has issued a notice of meeting to its 2500 shareholders, many of whom live in Canterbury, which alludes to the ongoing investigation by the FMA. The investigation is over related party loans early last year from a fund run by Perpetual Group to the Torchlight Fund, run by PGC's main shareholder George Kerr, a descendant of one of the founding families of PGC.

The notice for PGC's annual meeting in Auckland on December 10 sets out reasons for PGC proposing to move to no-tax Guernsey and to seek a listing on the London exchange, cutting ties with Canterbury, where it was founded.

Shareholders are being asked to vote on the proposals, which require 75 per cent approval - and they should be passed because Kerr controls 76 per cent of the votes.

Torchlight repaid the investigated loans last year, as required by the FMA, but maintains they were compliant with the governing deeds of Perpetual.

The FMA has continued to investigate these loans and other transactions from 2011-12, and is also investigating certain disclosure issues, the notice of meeting said.

In the 40-page document PGC said ". . . those investigations may delay achieving an LSE (London Stock Exchange) listing or affect PGC's ability to meet any eligibility criteria".

Asked how much of an obstacle the FMA investigation was to PGC listing on the LSE, PGC chairman Bryan Mogridge said yesterday: "It's fair to say I don't think really much. It's all to do with things in the past, but you never know until you move along with these things. An early stage view is it doesn't seem to be so."

The company's initial focus had been more on moving its home to Guernsey, he said.

"I personally don't see it as anything that is not insurmountable."

Even if PGC did not get the LSE listing it still planned to move to Guernsey.

Mogridge said the main reason was opportunities to enhance shareholder value.

The notice says in Guernsey PGC would "re-profile" itself as a real estate operating company, a type of investment closely followed by a specialist set of investors and analysts.

That should increase the liquidity of the shares, which PGC considers are undervalued by New Zealand investors. PGC has a net tangible asset backing of 64 cents a share but the shares trade at about 42c at present.

The notice says the pool of capital and range of investors was more diverse in London and investors had different appetites to take on risk.

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"Generally, a LSE listing will likely confer greater visibility and reputation upon PGC."

PGC has its remaining $4.8 million of assets in New Zealand up for sale. It has its investment now in hotels and property companies in Australia. A recent investment is 11 per cent in a regional newspaper company in the United Kingdom.

PGC shareholders who vote against the moves, but they are passed, can require PGC to buy their shares.

Also, if PGC stops being a New Zealand tax resident, its New Zealand shareholders will come under the Foreign Investment Funds tax regime if their holdings in PGC and other overseas entities are worth more than $50,000.

- BusinessDay

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