January 11, 2017 / 8:07 AM / in 6 months

China's HNA extends reach to NZ with $460 mln purchase of non-bank lender UDC

FILE PHOTO - The logo of the Australia New Zealand Bank Group (ANZ) is displayed on their main office building in Melbourne, Australia, July 27, 2016.David Gray

SYDNEY/WELLINGTON (Reuters) - HNA Group, one of China's most acquisitive conglomerates, said it would extend its reach to New Zealand with the $460 million purchase of asset finance firm UDC, prompting an immediate credit rating downgrade for the nation's biggest non-bank lender.

HNA, best known as the owner of Hainan Airlines Co (600221.SS), said the NZ$660 million acquisition from ANZ Banking Group (ANZ.AX) offered significant growth opportunities in Australia and New Zealand and would create synergies in its leasing business.

With a portfolio that ranges from car loans to equipment finance, UDC is New Zealand's largest non-bank lender, with $NZ2.6 billion in gross loans in 2016, according to KPMG. Toyota Finance New Zealand ranks a distant second with NZ$777 million.

Standard & Poor's said, however, it would downgrade its long-term rating of UDC to BBB from A-, given the likely loss of timely financial support from ANZ and adding that UDC may face challenges in maintaining its franchise in debt funding markets and amongst some of its borrowers.

It also said the sale could also change the risk appetite of UDC, which had traditionally been more conservative than other New Zealand finance companies.

Other firms to be acquired by HNA have also been hit with downgrades or placed on creditwatch. This includes Chinese information technology outsourcing firm Pactera Technology International Ltd which had its rating cut by Moody's Investors Service.

HNA, which has over $90 billion of assets globally, announced about $20 billion of deals in 2016 alone, Reuters calculations showed. Among them was a $6.5 billion purchase of a 25 percent stake in hotel chain Hilton Worldwide Holdings Inc (HLT.N).

UDC, which saw net profit rise 3 percent to a record $NZ58.5 million in the year to end-September, will join HNA's finance arm, which operates a diverse set of businesses in equipment leasing, insurance, and credit services.

ANZ said it expected the sale to be completed in the second half of 2017 though it was subject to regulatory approvals. It will need approvals from the Reserve Bank of New Zealand and the Overseas Investment Office.

"The sale of UDC is consistent with our strategy to simplify the bank," ANZ New Zealand CEO David Hisco said in a statement.

Last week, ANZ, which is seeking to boost capital and focus on its strongest competitive points, agreed to sell its 20 percent stake in Shanghai Rural Commercial Bank Co Ltd for A$1.8 billion.

The bank is also considering the sale of its Australian wealth and life insurance business, valued by the bank at A$4.5 billion.

Reporting by Jamie Freed and Charlotte Greenfield; Additional reporting by Matt Miller in Beijing; Editing by Edwina Gibbs

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