Marac to make provision for irregular loan

Finance company Marac Finance, an arm of Pyne Gould Corp, will make a NZ$2.5 million provision after discovering an "irregular" business loan during an audit.

The loan dates back to 2003 and involves lending that is outside the company's internally prescribed practices. Marac noted that it didn't appear to have involved personal gain but evidence showed that the unauthorised lending was being suppressed.

Marac did not provide details on the size of the original loan and said it will not offer any further comment until the interim results due later this month.

Marac Finance introduced new auditing processes in October 2009 after the company made key changes to the management team in September by hiring Craig Stephen to the new position of chief investment officer, and Sean Kam as the new chief financial officer. The changes were made as the company's parent, Pyne Gould Corp, aims to become a NZ-listed registered bank and asset management company.

A month prior to that, ratings agency Standard & Poor's downgraded Marac's rating to BB+ from BBB- and revised the outlook to negative from stable. The downgrade reflected its view that the company's credit profile had weakened because of the greater-than-expected deterioration in its asset quality in recent months in the property development sector.  

At the same time, it was well noted by S&P that property development financing represented less than 20 per cent of the company's total bank, and Marac plans to cease such lending.

As part of the steps to strengthen its position, Marac then said that at the operational level it had tightened its credit process and refocused its operation on the core business of plant and equipment, and vehicle financing.

In a recent development which may be linked with the irregular loan, Marac chief risk officer Grant Atkinson disappeared on February 2 and was found four days later sleeping rough in a park. According to other media reports, Marac 's chief investment officer, Craig Stephen, would not comment if the two events were linked.