Bidgee freezes debenture redemptions for 90 days

Agricultural financier Bidgee Finance Limited has become another victim of the deposit flight to safety, since the inception of the government guarantee of bank deposits in October, which Bidgee is excluded from.

Listed on the National Stock Exchange, Bidgee announced on Friday in a strongly worded statement that directors had resolved to defer payments on debentures for an initial period of 90 days, and withdrew the company's current prospectus effective immediately.

Bidgee didn't hold back in laying blame, saying the action is a direct result of the Australian government decision to guarantee the deposits of only some financial institutions, which will continue to have unprecedented consequences.

"The company is left with no alternative other than to freeze debenture redemptions." The government guarantee aside, the interest rates on Bidgee debenture stock has little to no premium to the general deposit market, with investors moving funds from hybrid deposits that no longer reward the perceived increased risk.

Debenture rates effective 6 November on the companies' web site have a six-month return of 6.8 per cent, one year paid half-yearly 6.5 per cent and three years 6.4 per cent.

Infomediary web site www.infochoice.com.au displays rates above six per cent for these terms paid by over a dozen better known institutions, with some rates still above seven per cent.

Bidgee outstanding debentures fell to $19.6 million in financial year 2008 from $20.2 million a year earlier, representing around 30 per cent of the company's funding.
Net profit in the year to June 2008 was $1.8 million, down from $2.3 million.