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‘New Zealand private credit fund formed to back local business’

In response to New Zealand banks continuing to tighten lending criteria for businesses, a new private credit fund with a target fund size of $150m has been established to work with local companies to provide growth capital.

The Peninsula Credit Fund, formed by a group of experienced New Zealand lenders and supported by capital from local business-owners and investors, will provide capital to businesses through direct private credit loans.

Andrew Pryde, Director at Peninsula Credit and previous Head of Corporate Finance at ANZ Bank, says the ability for Kiwi businesses to access credit has become increasingly difficult as local banks move from a relationship banking model to an automated “scorecard” type approach.

“This scorecard approach prevents local banks from investing the time required to understand and address their customers’ needs.

“Where credit is sought by business owners, and those credit requests fall outside conservative scorecard measures then credit is denied which has major repercussions for businesses,” he says.

Mark Hiddleston, Director at Peninsula Credit and formerly Managing Director of Commercial & Agri at ANZ Bank, says: “Peninsula Credit has been established to support business owners, entrepreneurs, and local businesses who have a vision but they have been unable to execute their ideas because of limited access to funding or inflexible funding solutions through traditional capital providers.”

Private Credit is a non-bank lending product where a loan is not issued on a public exchange and transactions are negotiated directly between the borrower and lender.

Globally Private Credit is an established and growing asset class with estimates predicting it will be worth US$2.7 trillion as an investment strategy by 2027.

Pryde says in New Zealand there is a growing use of Private Credit by borrowers as they seek flexibility in their funding sources. Investors are also attracted to private credit as it provides an opportunity to support good businesses through a diversified portfolio investment approach.

“The private credit market is well established in New Zealand for property development finance. But with banks tightening lending criteria because of regulatory requirements, cost pressures and the time and cost associated with credit requests that fall outside the box, there is growing demand and need for private credit loans for local businesses.”

WHAT’S IN IT FOR INVESTORS?

Private Credit funds appeal to investors because of their potential to deliver higher risk-adjusted returns compared to traditional fixed income assets or term deposits.

Pryde says, for example, the investment objective of the Peninsula Credit Fund is to generate quarterly cash-paying returns for investors through a diversified portfolio of direct loans to established and proven New Zealand businesses.

Peninsula Credit has an initial fund size target of NZ$60m with a targeted final close of NZ$150m of committed capital. Currently, investors get a targeted strong risk-adjusted annual return of 9.2% on their investment, comprising a margin of 3.5% over the published New Zealand bank bill rate (BKBM), which is closely linked to the OCR.

“It’s a win for both investors and borrowers. For borrowers, having access to capital that supports their growth strategies enabling them to take their business to the next level,” says Hiddleston.

Kiwi businessman and former Sistema owner Brendan Lindsay is an investor in Peninsula Credit Fund because it aligns with his “what’s best for New Zealand” approach.

“Investing in Peninsula Credit Fund allows us to continue our support of growing New Zealand businesses through the experience of Andrew, Mark, and the team,” says Lindsay.

Henare Walker, CEO of Nati Growth Limited, the economic and wealth generation arm of Te Runanganui o Ngati Porou, says: “The target quarterly cash-paying return is an attractive aspect for us as an investor in Peninsula Credit Fund, providing diversification against our inter-generational investments.”

KIWIS HELPING KIWIS

The Peninsula Credit Fund is focussed on supporting companies with well-established and proven business models, primarily those operating in the agriculture, corporate and commercial sectors with loan sizes in the range of NZ$5-15m.

“The Peninsula Credit proposition of kiwis helping kiwis is very strong,” says Pryde. “The investor commitments received to date are passionate about supporting and driving New Zealand business forward. Through the Peninsula Credit Fund, investors can support good New Zealand businesses through a diversified investment approach.”

He believes recent government announcements and articles regarding KiwiSaver investing into New Zealand private assets like Peninsula Credit is a good conversation to be having.

“It’s an exciting proposition to have KiwiSaver support behind New Zealand business while providing strong risk-adjusted returns for KiwiSaver members.

“The Peninsula Credit Fund is about backing great New Zealand businesses. It’s very much, Kiwis helping Kiwis to grow and expand their businesses and turn great ideas into a reality.”

 

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