Daily ShareChat: Pyne Gould Corporation

By Jenny Ruth

Thursday 1st October 2009

Pyne Gould Corporation's proposed recapitalisation program is a positive development which will position Marac at the forefront of the non-bank lending sector in the new regulatory environment, says Forsyth Barr analyst John Cairns.

Pyne Gold intends to raise $270 million through an underwritten pro-rata renounceable six-for-one shares rights issue priced at 40 cents a share and a placement to institutions. Of the proceeds, $125 million will be used to recapitalise Marac's impaired property development loans and an additional about $35 million of new capital will allow Marac to achieve registered bank status.

"The main risk is the likely demise of the finance company retail deposit funding channel post the expiry of the Crown guarantee in 2011," Cairns says.

"Marac is moving to mitigate this risk by seeking to become a registered bank and we believe the capital raising will certainly enhance its prospects."

However, because of the size of the issue and the spread of the share registry, there will be significant pressure on the rights price, he says.

"We would look for buying opportunities in the 2 cents to 3 cents range."

Cairns values Pyne Gould shares at 45 cents after the capital raising and he values Marac at its net tangible asset backing of $201.6 million with the risks to the upside.

BROKER CALL: Forsyth Barr rate Pyne Gould as hold.

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