Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ business and public sector organisations rethink debt

Tuesday 26 February 2013
News Release
New Zealand business and public sector organisations rethink debt

New Zealand businesses and public sector organisations are being more prudent in their approach to debt management than before the global financial crisis, shows the latest PwC’s New Zealand Debt Survey of organisations with $50 to $500 million of outstanding debt.

PwC Partner Roger Kerr says, “Debt management remains a significant area of focus for most New Zealand businesses and public sector organisations.

“Interestingly, and unlike the situation experienced during the global financial crisis (GFC), the issue isn't that borrowers are worried banks will be reluctant to lend money, rather organisations and their Boards are more aware of the risks associated with debt.”

PwC interviewed more than 80 New Zealand respondents representing organisations with a combined $16.6 billion of outstanding debt, or an average of $195 million per organisation. The idea behind PwC’s survey was to better understand how organisations, often with limited treasury resource, make decisions about debt management.

“Organisations well remember how difficult times were during the GFC. With current economic woes, it’s pleasing to see New Zealand entities are acting with greater prudency.

“Of course, this translates into some companies putting the brakes on aggressive expansion plans as they take a wait-and-see approach which impacts economic growth,” says Mr Kerr.

Many organisations have taken steps to reduce risk to their debt funding activities and mitigate the impact of any sudden deterioration in funding market conditions.

“We found some companies are refinancing well in advance of their needs and want to avoid showing debt as current in their financial statements,” adds Mr Kerr.

PwC Partner and Banking Sector Leader Sam Shuttleworth agrees with the survey’s finding that banking relationships are often historically based.

“Banks are very good at understanding their clients’ needs around funding and when to engage with them about funding requirements. The survey confirms most organisations are unlikely to change if a bank has shown the ability to lend through economic cycles without major changes to pricing, availability and terms and conditions.

“The survey found organisation’s greater prudency is also showing in the way organisations are building back-up in their banking facilities. So, instead of using two providers, some are beginning to engage the services of a third, and this approach has the added advantage of injecting further competition in an already competitive market,” adds Mr Shuttleworth.

Between private and public sector organisations, Mr Kerr says there is a marked difference in the way organisations approached their funding needs.

“The local government sector makes greater use of debt capital markets and is more likely to have or be considering obtaining a credit rating.
“With the recently established Local Government Funding Agency, councils have an additional funding option and can now generally access funds at cheaper rates than they could borrow in their own name. This is good news for councils and rate payers," concludes Mr Kerr.



© Scoop Media

Business Headlines | Sci-Tech Headlines


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news