Rakiura history revealed

Press, 25 January 1986, Page 24

Rakiura history revealed

By

Simon Louisson

in Wellington

The Reserve Bank has released to "The Press” the stock tender bidding history of Rakiura Holdings, breaking its “longstanding policy” of not releasing information about competitive commercial activities of companies it deals with. The bank says the release should not be taken as establishing a precedent but it considers that “in the circumstances of this particular case, the withholding of information is outweighed by other considerations which render it desirable in the public interest to make the Information available.” The bank took legal advice on the matter. The history shows that before its defaulted SIOOM bid, Rakiura submitted 5134.6 M on bids and was successful with 561.6 M, since it became a

registered bidder in March, 1984. Its largest bid before the JSIOOM tender was for S3OM on February 14, 1985, but this was unsuccessful. Its largest successful bid was for $25.5M on July 27, 1984. During 1985 Rakiura submitted bids for all tenders except numbers 19, 22 and 23. Other than the SIOOM bid in the December tender, Rakiura bid for $79.6M of stock in 1985 but was only successful for 514.6 M. The bank says that several registered bidders have made no bids and the largest bidder succeeded in purchasing SBOOM in total through the tender scheme. Money market dealers have been critical of the bank for accepting such a large bid from what they consider a “part

timer.” They say that the Reserve Bank should have had a more stringent ongoing monitoring scheme for registered bidders which could have prevented the default that will cost the taxpayer an estimated SB.7M. Bank officials however say that they had no reason to question Rakiura, based on its track record. Rules for registering approved bidders have recently been changed by the bank, but Rakiura escaped the review because of its previous history. Some dealers were surprised at the extent of Rakiura’s tendering history but discounted the bulk of it because it was under index-linked or the uniform-yield allotment of the Muldoon regime, which were not competitive.

One dealer said his firm was a substantial player which normally bid between SSOM-SIOOM and won between 0 and SSOM. “We have never looked like being able to put in a bid of SIOOM to clean up.” He said the Reserve Bank knew that interest rates had overshot coming down and that Rakiura’s exposure was colossal. “We expected the bank to take steps to see that Rakiura were in a position to settle,” he said. “The fact that the bank could not get hold of Mr Alexander would indicate to most people there was trouble ahead.” Dealers were most upset about the bank’s lack of monitoring system or contingency plans when a default looked probable.