Tag Archives: Interest rates

Richard Healey on Aurora’s asset value —heralds “massive increase in rates”

Just some little things our beloved leader Mayor Cull isn’t talking about urgently with his Councillors and Dunedin ratepayers at large.

M U S T ● R E A D

Excerpts from Richard Healey’s Facebook 14.2.17:

[click to enlarge]
richard-healey-facebook-14-2-17-comment-excerpts

Related Posts and Comments:
14.2.17 DCC not Delta #EpicFail : Wall Street falsehoods and a world class debt
11.2.17 Shudder : Aurora Energy programme leader likely delusional…
6.2.17 Delta #EpicPowerFail 9 —The Curious Case of Godfrey Brosnan and…
19.1.17 Jarrod Stewart is EXACTLY RIGHT [what would Steve Thompson know]

█ For more, enter the terms *delta*, *aurora*, *grady*, *steve thompson*, *richard healey*, *dchl*, *epicpowerfail* or *epic fraud* in the search box at right.

Posted by Elizabeth Kerr

This post is offered in the public interest.

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NZ Economy —if you’re not Treasury

Either an interest rate hike or rising unemployment, together with falling migration, would spell “the end of the party”….
Due to the Reserve Bank putting restrictions on lending and other measures, the underlying economy was in good shape to withstand “a shock”. –Dominick Stephens, Westpac Chief Economist

### radionz.co.nz Fri, 10 June 2016
Nine to Noon with Kathryn Ryan
The risks of rising household debt
9:08 AM. NZ household debt has reached half a trillion dollars. That’s $100,000 of housing and personal debt for every man, woman and child. Nine to Noon speaks to Westpac Chief Economist, Dominick Stephens and Massey University’s Dr Jeff Stangl about the risks that poses to the economy. Link
Audio | Download: Ogg MP3 (30′19″)

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### radionz.co.nz Sat, 11 Jun 2016 at 12:15 pm
RNZ News
Tough times coming as debt soars, warns economist
Record high household debt levels are not sustainable, warns a leading bank economist. At half a trillion dollars, housing and personal debt has hit 162 percent of the average household’s annual disposable income – higher than levels before the global financial crisis.
Westpac Chief Economist Dominick Stephens told Nine to Noon the decline in dairy prices was hurting the regions, but the downturn following the end of the Canterbury rebuild would be more severe than most people were prepared for. The rebuild played a huge role in the “rock star economy” between 2012 and 2014, with the international reinsurance industry dropping $20 billion on New Zealand and the government pumping in another $10b. As that money dried up, some business owners could find their businesses were not as robust as they thought, Mr Stephens said. What was less certain was when the “borrow and spend” dynamic – fed by skyrocketing houseprices – would come to an end.
Read more

harrys_view 19 Jan 2016 Harry Harrison at South China Morning Post [scmp.com] 1Harry’s View 19 Jan 2016 [scmp.com]

Posted by Elizabeth Kerr

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Delta #EpicFail : Strategic Reasons & Outrageous Logic

Election Year : The following opinion is offered in the public interest. -Eds

Delta - AuthorUphillBattle - The Books [blog.smashwords.com]

Received from Christchurch Driver [CD]
Tue, 19 Apr 2016 at 10:48 p.m.

Readers, tonight’s exposition is to examine the Dunedin City Council (DCC) worldview that does not contemplate a sale of Delta at less than $45M. Your correspondent says that will never happen on any rational economic basis, so the next best thing is to pretend that it would not be in the ratepayers’ best interests to sell at all, seemingly at any price.

However, annoyingly, logic and reasons must intrude at some point, and in the recent report on DCHL asset values, the DCC have a crack at pushing the Delta water uphill.

Agenda – Council – 11/04/2016 (PDF, 1.6 MB)
Item 22 Dunedin City Council Investments and Returns (pp 109 – 123)

Tonight, readers, we shall dwell on and allow the TWO big “strategic reasons”, the DCC propose to retain Delta, to stand in splendid isolation, while readers allow the cool chill of logic to bring these clouds of hot air back to reality.

We shall also overlay some markers over Delta’s financial figures that give support to your correspondent’s contention that Delta is at risk. (careful words needed here, readers !)

Safely camouflaged at para 55 (page 117), deep in the DCC report, the following statements appear : “If Delta were to be sold by the DCC, one likely outcome…. [it could be] purchased by a competing company in the same field. One consideration…. is the potential ‘head office’ job loss to Dunedin if Delta were to be sold to an existing company which is not locally owned.”

Stop right there, readers. The DCC say the first, most important consideration in retaining Delta is to retain the Delta ‘head office jobs’ in Dunedin. At one level we can take this to mean that the DCC are very fearful that the current occupiers of the Delta head office jobs in question would not find similar work in Dunedin. Your correspondent thinks that is a very well-founded fear. But the DCC head of economic development tells us the city is growing and it is hard to attract executive staff to the city…. it is a taxing puzzle why the authors of the report ignore their own staff…. At the next level, your correspondent is vexed at the concern shown by the DCC for the six figure inhabitants of the Delta Head Office suite. (Note, there are 70 people earning in excess of $100,000 at Delta, your correspondent guesses that the Head Office inhabitants occupy the highest echelons of those salaries). This brings a whole new meaning to the (draft) Statement of Intent requirement to be a “socially responsible …. corporate citizen”. At a higher level again, the DCC appear to say that the welfare and future of the head office positions rank ahead of the core task of providing returns to the ratepayers.

Readers, remember that DCC provide these reasons as reasons not to sell Delta even if someone paid the massive premium of 300-400% over the $15.804M shareholders equity (which is about to suffer a severe Noble induced virus).

Your correspondent is very sure these revolutionary themes of Soviet Style central planning and corporate welfarism were not intended in the Delta ‘Statement of Intent’ which is meant regulate how the company is run.

Next up as the DCC apologia for retaining Delta is the statement, “the loss of Delta from the local contracting market, particularly if through acquisition from an existing contractor, would remove an element of competition from an already limited local market”.

This is illogical. Let us count the ways:

1. If competition is “limited” then margins will be high, and demand for skilled staff intense, so any logical purchaser would leave the Delta structure alone to continue its high margin work…. but of course, if there is limited competition and Delta are not making good profits, then there is a problem…. and Delta should be sold to an entity that can generate good profits in a limited market.

2. It can be safely assumed that Delta’s local competitors Fulton Hogan, Downer, SouthRoads, Whitestone, Asplundh, Waste Management, and any of the local power contracting companies are not stupid and they would have no interest in paying the DCC $45-60M for $15.804M of equity (on a good day). If Delta expired, the limited competition just got less, and paydays all round for all left standing. Your correspondent says then that any purchaser is likely to be someone who does not have a presence in the market, and sees potential for profit in this market, allegedly with limited competition. If that were true they would leave Delta as it was, maybe even with some of its precious head office jobs, to continue their (merry and profitable ?) way. (For the time being at least).

3. The bottom line is your correspondent posits that Delta will never be sold in its current form, because its competitors know, even if DCC Treasury does not, that Banks have certain standards for lending money to companies, and an important one is the debt to equity ratio. Delta has $26.9M of debt and $15.804M of equity. That is a debt : equity ratio of 183 % which this correspondent says is far too high for a contracting company. A debt : equity of 100 % or less is usual in this sector. Another is the Liquidity (Quick) Ratio which is Current Assets / Current Liabilities. Contractors should have a minimum of 1.35 and many accountants would say 2. (What would Mr McLauchlan say ….?). Delta has $17.5M of current liabilities and just $220,000 of cash in the bank. This is one seriously undercapitalised contracting company.

Delta will no doubt say their quick ratio is fine because the accounts show $25.244M in receivables, but this includes the very non-current and very illiquid Noble debt of $13.2M. They do have $2.84M of Work In Progress (WIP) which is included under inventories. They then have proper current assets of $0.22M cash, $2.84M WIP, and $12.2M Receivables, ($25.24-13.2M) for a total of $15.08M and a quick ratio of 0.88. The bottom line is : even putting aside the elephantine $26.9M in debt, Delta have serious cash flow issues with a quick ratio of less than 1, and if they have a further problem contract, or even just a delay of a month or two getting paid on a larger contract, they are not just on a cashflow knife edge, but in serious trouble. Delta has basically no cash reserves as at June 2015. Of course, Mr Cameron did not dwell on that factoid in his report….

Readers, the quality of the excuses made in support of retaining Delta are of the same quality as the prediction of its value at $45-60M.

[ends]

█ For more, enter the term *delta* in the search box at right.

Posted by Elizabeth Kerr

1. factoid

*Image: blog.smashwords.com – AuthorUphillBattle, tweaked by whatifdunedin

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Delta #EpicFail Noble Subdivision : Avanti Finance —Feeding at the Delta Trough

Election Year : The following opinion is offered in the public interest. -Eds

Received from Christchurch Driver [CD]
Monday, 18 April 2016 11:03 p.m.

Readers may remember that in an earlier post, ‘Gold Band Finance – The Little Finance Company that did (Delta)’ March 2016 – your correspondent was lacking information on what transpired between Avanti Finance and Delta.

Your correspondent indulged in some dark speculations about what Delta might or might not have done. But recently your correspondent has received email information shining a light on that transaction, a welcome piece of disinfectant as Justice Brandeis would say. While we no longer see through a glass darkly on this matter, the disinfectant metaphor is apt, as yet again, Delta suffers another grievous and substantial financial wound, this time, a deliberate and self-inflicted one. It seems that in order to save or salvage something from the Noble debacle, it is first necessary to destroy the Delta financial reserves.

The conversation must have gone like this : “Dear Avanti, you have gate-crashed our game of Monopoly and you have further erred in somehow gaining a piece of the Noble subdivision that we simply must have ! Poor form, poor form indeed. Now chaps, we can do this the easy way or the hard way ! There is no way in this whole wide world we are prepared to pay you the 37 % per annum interest rate that your friends at Gold Band are charging on their part of the mortgage…. That was then, and this is now !! Take it or leave it, our offer is…. not a penny more than…. 34.50 % !!”

Yes readers, Delta in March 2015, paid Avanti $2.19M for its interest in the Noble Investments (NIL) first mortgage. Avanti had paid Gold Band $1.5M for the same interest just 16 months before in November 2013. A gain of $690,000, or 34.50 % per year. Let’s see, only 350 times the rate of inflation. Avanti made out like a bandit, but then, they are a finance company…. and Delta are, well, Delta.

Delta CEO Mr Cameron confirmed that Delta spent $3.3M “strengthening its position”. We now know how that went : $1.2M to Gold Band, $2.19M to Avanti, which all pans out, taking into account a rounding error.
What we do not know is the timing of the $3.3M, but that is not a central issue at the minute.

Readers should bear in mind that if the situation is resolved by June 2016, then the first mortgage of $1.75M lent by Gold Band around 2004, could have spawned the amazing sum of $11.8M, and at least $9.1M. Gold Band and Cup Investments (CIL) will have lent out $1.75M and received $3.1M plus $2.7M received from Avanti and Delta. That is a total of $5.8M. Huge. Delta have paid $3.3M for a part security and if they are charging around the same interest as the others, then their figure will be around $5.5-6M. That is, the first mortgage securities of Gold Band and Delta will consume the first $10M of the mortgagee sale. Not looking good for Delta’s core debt of $11.35M of lower ranked securities….

ODT 18.4.16 front page small [allied.press.co.nz] 1bYour correspondent is desperate to see a Councillor ask for confirmation about this and the Gold Band and Avanti ‘premium’ they paid. Perhaps then the Otago Daily Times might sense that Delta paying $1M plus over the face value to Gold Band and Avanti for part of a first mortgage in an attempt to get a better recovery on their lower ranked securities is News, and not in a good way. Heaven knows they could do with some – Building Consent Delays on the front page – Good Lord what next ! more cat pictures ?
The Wash ?

Your correspondent can’t wait to read the emails around that board decision…. when the Auditor-General releases them. Will there be another email from a Delta Director stating in effect “if the subcommittee agrees then I agree with them?” (As there was for the ill-fated decision to proceed with Luggate).

Next we shall look at the “Strategic” reasons the DCC put forward as compelling reasons for retaining Delta in its report…. Irony and comedy abound….

[ends]

█ For more, enter the term *delta* in the search box at right.

Posted by Elizabeth Kerr

*Image: alliedpress.co.nz – ODT 18.4.16 front page sml

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Warning! NZ disposable income down

Link received Mon, 6 Apr 2015 at 1:00 p.m.

█ Message: Wouldn’t read this in local media !!!

### marketoracle.co.uk Apr 05, 2015 – 01:28 PM GMT
Economics / Asian Economies
New Zealand Economy – There’s Trouble Brewing In Middle Earth
By Raul I Meijer
For the second time in three years, I’m fortunate enough to spend some time in New Zealand (or Aotearoa). In 2012, it was all mostly a pretty crazy touring schedule, but this time is a bit quieter. Still get to meet tons of people though, in between the relentless Automatic Earth publishing schedule. And of course people want to ask, once they know what I do, how I think their country is doing.
My answer is I think New Zealand is much better off than most other countries, but not because they’re presently richer (disappointing for many). They’re better off because of the potential here. Which isn’t being used much at all right now. In fact, New Zealand does about everything wrong on a political and macro-economic scale. […] I’ve been going through some numbers today, and lots of articles, and I think I have an idea what’s going on. Thank you to my new best friend Grant here in Northland (is it Kerikeri or Kaikohe?) for providing much of the reading material and the initial spark.
To begin with, official government data. We love those, don’t we, wherever we turn our inquisitive heads. Because no government would ever not be fully open and truthful.

This is from Stuff.co.nz, March 19 2015:
New Zealand GDP grew 3.3% last year

New Zealand’s economy grew 3.3% last year, the fastest since 2007 before the global financial crisis, Statistics NZ said. Most forecasts expect the economy to keep growing this year and next, although slightly more slowly than in the past year. For the three months ended December 31, GDP grew 0.8%, in line with Reserve Bank and other forecasts. That was led by shop sales and accommodation. That sounds great compared to most other nations. But then we find out where the alleged growth has come from (I say alleged because other data cast a serious doubt on the ‘official’ numbers) […] while the economy ostensibly grew by 3.3%, disposable income was down. That’s what you call a warning sign.

….Meijer’s commentary continues in reference to recent New Zealand news stories:

Stuff: Dairy Slump Hits New Zealand Exports To China
Radio NZ: Export Drop Rattles Companies
NZ Herald: World Dairy Prices Slide 10.8% On Supply Concerns
Radio NZ: World ‘Awash With Milk’
NZ Herald: Stress Too Much For Farmers
NZ Herald: Hot Properties: Auckland Valuations Out Of Date Within Months

He ends by citing NZ Herald: New Zealand’s Economic Winds Of Change:

Chaos theory calls it the butterfly effect. It’s the idea that a butterfly flapping its wings in the Amazon could cause a tornado in Texas. The New Zealand economy has plenty of its own butterflies changing the weather for GDP growth, jobs, interest rates, inflation and house prices. [..] One of the flappiest at the moment is the global iron ore price. It’s barely noticed here but it’s an indicator of growing trouble inside our largest trading partner, China, and it is knocking our second-largest partner, Australia, for six. It fell to a 10-year low of almost US$50 a tonne this week and is down from a peak of more than US$170 a tonne in early 2011.
[…] President Xi has reinforced the contrasting effects of the changes in China on Australia and New Zealand by encouraging consumers and investors to spend more of China’s big trade surpluses overseas. Tourism from China was up 40% in the first two months of this year from a year ago, and there remains plenty of demand from investors in China for New Zealand assets.
The dark side of this tornado in New Zealand after the flapping of the butterfly’s wings in China was felt in Nelson this week. The region’s biggest logging trucking firm, Waimea Contract Carriers, was put into voluntary administration owing $14m, partly because of a slump in log exports to China in the past six months.
That’s because New Zealand’s logs are now mostly shipped to China to be timber boxing for the concrete being poured in its new “ghost” cities. The Chinese iron ore butterfly has flapped and now we’re seeing Gold Coast winter breaks become cheaper and logging contracts rarer.

Read full article

Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

Posted by Elizabeth Kerr

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NZRU ‘hustles’ towns and cities to build stadiums

What happens to our cathedrals, the large stadiums found in every major centre, if we lose faith?

### stuff.co.nz Last updated 05:00 14/06/2014
Sport
What about the state of New Zealand stadiums?
By Matt Nippert
[Excerpts from a longer article…] The covered 31,000-seat Forsyth Barr Stadium in Dunedin, constructed in time for the 2011 Rugby World Cup, may be the newest major sporting facility in the country but has already proved the most controversial. The bulk of its $224 million construction cost came from Dunedin City Council, but ongoing costs to ratepayers have caused considerable angst. Ratepayers were forced into a $2.3m bailout in May, and are mulling whether a permanent annual subsidy will be required to keep it running.

Getting to grips with exactly how much stadiums cost is a tricky exercise. Construction has often been piecemeal, with grandstands redeveloped or rebuilt over time, blurring total capital expenditure. And determining operational costs – whether stadiums require ongoing contributions by ratepayers – is further complicated by many facilities being run from within city councils or by council-controlled organisations. This makes the extraction of a discrete set of accounts, most notably in Dunedin and Waikato, an impossibility.

Analysis of accounts for Wellington and Auckland, run by dedicated trusts and two of the most transparent stadiums, shows that break-even is realistically the best case.

At New Zealand Rugby headquarters, chief executive Steve Tew broadly agrees that the glory days [of attendance at games] are over. Viewers watching broadcasts of a game have supplanted punters going through stadium turnstiles.

But there is one niche where the faith of the rugby faithful remains strong: All Blacks tests. Hosting the national team is often the only time stadiums up and down the country reach capacity.

While great for New Zealand Rugby coffers, Massey University’s Sam Richardson says the All Blacks have warped stadium construction priorities. “It’s an absolutely huge detriment. If you’re building a stadium where the financial viability year to year relies on an All Blacks test, there’s no question New Zealand Rugby plays a massive part in whether these facilities are going to be used to their potential,” he says.

Canterbury University economist Eric Crampton says building capacity for a solitary annual All Black test is akin to “buying a six-bedroom house just in case both sets of grandparents come to visit at the same time”. Crampton says the proliferation of large loss-making stadiums, both in New Zealand and worldwide, has been mainly because of the economic equivalent of hustling. “Sporting teams have been able to convince councils all over the place – and have been able to play them off against each other by threatening to move – to build excessive stadiums.
Read more

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“Fifa, like the International Olympic Committee, is widely regarded as corrupt. In that, it reflects our flawed species; while capable of fabulous feats, a dark side lurks.”

### ODT Online Sat, 14 Jun 2014
Editorial: Revelling in sport
OPINION As Dunedin and the South gear up for the excitement of tonight’s rugby test in the city, a sporting event in another league entirely kicked off yesterday.
Read more

Garrick Tremain – 14 June 2015

Posted by Elizabeth Kerr

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DCC, Dunedin City Treasury and 3 big banks [Interest Rate Swaps]

WHICH THREE BANKS, DCC ??????

Comments received.

Rob Hamlin
Submitted on 2013/12/17 at 3:02 pm

As some of you may recall I have been very interested in DCTL and its large gains and losses on interest rate swaps. The following article http://nz.finance.yahoo.com/news/comcom-issue-proceedings-against-asb-194400510.html describes today’s announcement by the Commerce Commission to investigate ANZ, ASB and Westpac for mis-selling interest rate swaps to farmers – causing massive losses to these borrowers.

My interest has been further piqued by the arrangement between DCTL and three ‘independent’ banks called a ‘secured multi-option note facility’ within which these swaps are sold to DCTL by said ‘independent’ banks. The ‘secured’ as I have mentioned previously involves an ‘on call’ capital commitment by DCC to DCTL that has been deliberately put in place to circumvent Section 62 of the Local Government Act, which specifically prohibits council guarantees to trading companies. At $850 million of capital (which the DCC does not have), this amounts to some $17,000 for every ratepayer in this city – and you are liable for it.

As I have mentioned before, the very large annual fluctuations in gains and losses reported by the DCC due to interest and currency derivative exposure indicates that the DCC, via its $850 million guarantee to DCTL, is very deep indeed into this particular festering pile of poo.

I have lodged an LGOIMA request with the DCC for the identity of the three banks who are in the ‘secured variable rate note facility’ swap fest with DCTL. However, my unofficial sources indicate that the membership may be between 67% and 100% in common with the three banks mentioned in the ‘Stuff” report on large-scale interest rate swap mis-selling – Time will tell. But might be an idea to find the hammer and your piggy bank.

****

Russell Garbutt
Submitted on 2013/12/17 at 4:13 pm

Rob, I simply cannot understand the role of the OAG in all of this. The OAG provides auditing services to the Dunedin City Council and is supposedly the watchdog that ensures things are all tickety-boo in City Hall. But as we have already seen in the Kaipara case that the OAG now says that it is terrible that all of this borrowing took place, but that THEY ARE NOT ACCOUNTABLE. Surely to goodness that they have seen the actions of the CFO of the DCC to subvent the point and purpose of Section 62 of the LGA. Equally puzzling is how they have not been warning of the ramifications of these infernal legalised Ponzi schemes as they have been described elsewhere.

I distinctly remember the sacked Athol Stephens explaining to me in his office that many of the financial dealings of the DCC were to avoid tax liabilities. Athol was both a Director of a Council Board and an employee of the Council as I recall at the time.

There is enough smell round this issue to warrant a lot of interest by the OAG and the mainstream media, but sadly it is just too plain in the case of the OAG that they really aren’t interested in pursuing anything that would show that they themselves have been slack and incompetent, nor are they interested in pursuing anything that involves them in any serious work.

In the case of the media, it’s all just too hard. TV simply isn’t capable and is more interested in turning news into entertainment, and the financial reporters in the papers can’t seem to get their heads round anything substantial.

A case of the fox inside the henhouse and another one on the outside, looking out for the farmer.

Posted by Elizabeth Kerr

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