Taking Stock 16 April 2026

Chris Lee Writes:

IF a new moneylender wanted to pick a time to grow its loan book, now might not be an optimal time.

Receiverships and liquidations are at record levels, business confidence is low, discretionary spending is falling, and further job losses look to be inevitable.

McCains and Watties are not alone in planning closures.

So when the tiny moneylender Runway bought the 37-year-old factoring company SH Lock & Co, now known just as Lock & Co, its ambition to quickly grow its loan book from $40m to several hundred million was, if nothing else, brave.

Factoring invoices comes loosely within the definition of cash flow lending, an area of banking requiring robust data and detailed knowledge of the debtor, as well as the supplier of credit. To achieve scale in factoring, a loan book of hundreds of millions is so improbable as to be laughable.

For that reason Runway plans to get involved in other forms of lending like asset-financing, an area of lending in which UDC Finance, with 100 years of experience, dominates the market.

Runway also hopes to grow by offering term loans. Its target market will be the small and medium sized enterprises (SMEs) which generally have fewer than 20 staff.

The main banks do not shun SMEs but are highly selective, have a huge advantage in holding data from which to judge SME behaviour, and charge bigger margins to reflect risk. Many have tried low-cost lending processes to SMEs and come unstuck. Matrix lending, performed by computerised box-ticking, is easily gamed.

Small businesses that struggle rarely have shareholders with liquid assets that might shore up cash flow problems.

All of this explains why SMEs are friendless when their times are troubled.

Despite this, Runway might be different from all the previous moneylenders which have drifted away in recent decades.

Think GE Finance, owned by a giant, General Electric, yet still defaulted on its lending commitments in 2008, along with several dozen other moneylenders.

I think of so many finance companies which hired senior bankers with genuine experience, yet collapsed, as a result of failure to collect their loans. Provincial Finance, St Laurence, Allied Nationwide, Strategic Finance, and National Mutual Finance all foundered, discovering that moneylenders need much more than just a lender trained by a bank.

They need a comprehensive database from which to observe patterns of behaviour; they need wide knowledge of different lending segments; they need access to capital from their shareholders, and most of all they need patience and wisdom at the top.

That is where Runway may have the comparative advantage that justifies its audacious plans.

Its chairman is one of New Zealand’s smartest business leaders, Marko Bogoievski, a man whose accomplishments, personal attributes, and reputation puts him close to the level of New Zealand’s greatest ever banker, the late Sir John Anderson.

Bogoievski made his breakthrough during the limp years of Theresa Gattung’s failed leadership of Telecom, a period when Bogoievski was lurking in Telecom’s second tier of leaders. It was he who recognised that the internet would curl the edges of Telecom’s Yellow Pages, so he sought to sell it before others recognised that its business model would become obsolete.

Brilliantly, he found some inept investment bankers and pension funds who combined to buy the Yellow Pages for more than $2 billion, nearly 20 years ago. A consortium comprising CCMP Capital and a Canadian Teachers Pension plan paid $2.24 billion to Telecom for the print and internet rights to the Yellow Pages. Its value today might be a tiny fraction of that sum.

Gattung may have been praised for this improbably lucrative transaction, but Bogoievski was the brains trust. He went on to a stellar career with Morrison & Co / Infratil, the company founded by the late Lloyd Morrison.

Bogoievski now runs a private investment company, and will chair Runway.

If he endorses a business model for Runway, the plan will have been skilfully analysed. Bogoievski will have access to real capital. The bankers he will choose will manage the book.

It is not clear from where Runway will obtain the money it proposes to lend but it is a fair guess that Runway will have access to enough capital that it will attract debt offers from banks. Maybe it might also securitise loans, if its growth is rapid and profitable.

SMEs - by definition employing fewer than 20 people - definitely will need debt and equity to grow in this currently troubled environment.

Perhaps, just perhaps, Runway might develop the credibility to become the lender the SME sector needs.

Runway will not automatically gain a credit rating and then gain access to the Crown Deposit Guarantee Scheme, but if in time it wanted to raise retail deposits it would by some distance be the best-governed of those non-banks which operate in the non-bank lending area.

One hopes the new lender has patience. The first few years will be hard.

New Zealand needs a credible non-banking sector. The sector currently survives because of the Crown deposit guarantee.

Currently the value of the guarantee is so underpriced that the guarantee looks like a hazard for taxpayers, lurking around the next corner.

Bogoievski will set a proper standard, I expect, just as Sir John Anderson would have done.

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THE loss suffered by Synlait Milk will have been anticipated by its bankers but perhaps not by the innocent investor who expects its major shareholder (Bright Dairy) to execute the recovery plan, inject hundreds of millions to restore the company, and then share the recovery with minority holders. Fat chance.

For as long as I can recall, China’s investments in NZ have rarely, if ever, been constructed to share rewards with NZ minority shareholders.

Very few of our clients would still hold Synlait Milk. It has now sold its processing plant at Pokeno, one of a few assets built or acquired some years ago. It sold for a figure much less than true cost. It will reduce debt with the proceeds. It will process farmgate milk at Dunsandel near Rolleston in the South Island and abandon its North Island aspirations.

It may soon revert to profitability, at a modest level. But Bright Dairy will want all others to be subordinated behind it when there is loot to be distributed.

Synlait Milk’s next dividend for all shareholders is likely to be noticed by the crew of Artemis II before it is noticed by NZ shareholders, and may well rely on cheese sales at that sort of atmospheric elevation.

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PERHAPS there will be a similar wait for dividends for any NZ shareholders in Dangerous Goods Ltd, the NZ company founded by Simon Henry to dispose of unwanted chemicals.

Henry’s company was priced loftily at $4 a share before he was set upon for a silly and irrelevant comment about a woman from My Food Bag. Henry scuttled off to Australia, delisted from the NZX, and has since had to deal with internal fraud, financial losses, regulatory issues regarding late reporting, and a collapsing share price.

What was $4 is now 40 cents.

While he battles with regulators in Australia, his ambitious brother, Bernie Whimp, says he plans to go to court to take on New Zealand’s financial market regulator (the FMA).

The FMA wants to clean up dozens more of Whimp’s companies, knowing client money has been invested by Whimp and his team in less-than-inspired choices, and doubting the solvency of the companies in the Whimp group.

Former Whimp staff allege that, of the $44 million he raised from the public, some $6m was lent to him or his private companies.

Whimp says these loans were documented and interest-bearing. I am not sure that documentation is of particular comfort to his unwise investors.

I have to assume that the original offer to invest pointed out that money raised might be lent to Whimp, and that the investors were happy with this.

It does seem that the brothers, Simon Henry and Bernie Whimp, will be in the spotlight for some time. (Henry changed his surname).

Whimp says his investors will lose many millions if he is not allowed to nurse his stock picks back towards breakeven prices. It seems those investors lost many millions when he was allowed to use the money, so the logic of reverting to him seems questionable.

New Zealand investors without access to financial advice will always be at risk.

This is not an uncaring swipe using the old saying of a fool and his money, but is a plea to all investors to use Mr Google, or an experienced financial advisor, before reacting to newspaper advertisements by sending in money.

Hopefully, a class action will emerge to test the liability of newspapers which run advertisements, collect the revenue, but perform no due diligence, effectively facilitating the schemes that are advertised.

The Otago Daily Times group will have a board of directors. That board should be obtaining good legal advice on what its liabilities might be when it publishes advertising. Perhaps there is no liability. Perhaps it will find there is no accountability however improbable the advertising claim (20% returns p.a. etc).

My view is there should be accountability.

A litigation funder might want to investigate. Parliament might want to consider new, tough laws.

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Travel

17 April – Napier – Johnny Lee

22 April – Auckland (Ellerslie) – Edward Lee

23 April – Auckland (Albany) – Edward Lee

28 April – Wellington – Edward Lee

6 May – Christchurch – Johnny Lee

Chris Lee & Partners Limited