Crown Retail Deposit Guarantee

We have withdrawn from the Crown Guarantee. Eligible Secured Deposit Investments made prior to 6 November 2009 will be covered by the Guarantee until 12 October 2010.

Background

Effective 12 October 2008, the New Zealand Government announced a retail deposit guarantee. Asset Finance applied and was duly accepted into the Crown Guarantee Scheme in November 2008. Asset Finance requested withdrawal from the Crown Guarantee Scheme prior to the expiry of the guarantee period, with effect from 6 November 2009.

Deposits made on 6 November or after are not covered by the Crown Guarantee.

Why Did Asset Finance withdraw from the Crown Guarantee?

Because the Company believed it (along with most non-bank deposit takers) was unlikely to achieve the minimum credit rating required to continue in the scheme as it is proposed to be extended, the Company believed that it was essential for the future of its business that it developed and secured alternative sources of funding that extend beyond the term of the current guarantee period as soon as possible.

Asset Finance believed that continuing in the guarantee scheme would actually inhibit its ability to develop alternative funding sources due to the premium required to be paid to cover the cost of fees for the scheme – a premium that could be offered to investors instead.

How has Asset Finance managed since the withdrawal?

Subsequent to withdrawing from  the guarantee Asset Finance achieved a B credit rating, which is less than the BB rating required rating to continue in the extended scheme. However the combined weighted average deposit term for all deposits received from 6 November 2009 to 31 March 2010 was 30 Months, well outside of any guarantee period and double the average actual loan term.

Given these factors, the Company is pleased with the forward thinking decision taken in November 2009 to withdraw from the scheme.