Heartland to raise up to $59m at 10% discount to fund loan growth

Heartland Bank plans to raise up to $59 million in a discounted rights offer to shareholders to help fund an expanding loan book, which rose at an annual pace of 16 percent in the September quarter.

The Auckland-based lender will sell shares at $1.70 apiece through a 1-for-15 pro rata rights issue, which it plans to use to help fund credit growth and maintain a healthy balance sheet. That's a discount to the $1.89 price the shares closed at yesterday and a 9.5 percent discount to a theoretical ex-rights price of $1.88.

The bank reported a 12 percent increase in net profit to $16 million in the three months ended Sept. 30 on a 16 percent gain in net interest income to $44.9 million with net finance receivables totalling $3.68 billion at the balance date. It affirmed annual guidance for net profit of $65 million-to-$68 million

"Heartland expects underlying asset growth to continue during the remainder of the 2018 financial year," chief executive Jeff Greenslade said in a statement. "To support continued growth in its loan portfolio and maintain a strong balance sheet, Heartland is seeking to raise up to approximately $59 million of new equity under a pro rata rights issue."

The equity issue comes just three months after Heartland raised $150 million through a five-year bond sale, which it planned to use for general corporate purposes. Heartland operates in different markets to the larger Australian-owned banks, favouring higher margin consumer lending, such as auto-loans and reverse mortgages, and investing in online lending channels, such as peer-to-peer lender Harmoney.

The bank's rights issue opens on Nov. 23 and closes on Dec. 8, with any rights not taken up to be sold through a shortfall bookbuild. The rights won't trade on the NZX and the offer isn't underwritten.

"Given the size of the offer and the intended use of proceeds - which is to support continued strong asset growth over time - Heartland did not consider that underwriting provided value for shareholders," Greenslade said.

(BusinessDesk)