Crown Regional Holdings: Over half of $433m loan portfolio at risk of default

BusinessDeskreported late last year that of the $366m advanced by the Provincial Growth Fund since 2018, less than 10% had been repaid. Many of the loans have long repayment terms.

CRH equity investments – a much smaller proportion of its balance sheet – also saw a deterioration in solvency.

Despite a further $8m capital injection during the year into troubled Whakatōhea Mussels (Ōpōtiki), the assessed value of CRH’s 40% shareholding in the aquaculture venture remained steady at $12m.

CRH has invested in Whakatōhea Mussels since 2019, with $52m invested by the Crown to date. The revised valuation of CRH of its shareholdings suggests its value has shrunk by three-quarters over this time.

The most recent financial statement for Whakatōhea Mussels flagged widening losses (increasing to $17.4m on only $15.1m in revenue) and material uncertainty over its ability to continue as a going concern. The company said it was optimistic a further $15m capital raise would mitigate this concern.

CRH chairman John Rae acknowledged some deterioration in his foreword to the annual report.

“There has been a modest increase in At-Risk projects from the previous year, which continues the trend of increased risk in a challenging economic environment,” he said.

“These investments remain concentrated in sectors and regions where traditional financing is limited, underscoring the Government’s role in bridging critical funding gaps. The economic environment has remained difficult, with persistent inflation, high interest rates, and constrained labour markets.”

For the second year in a row, CRH was late in meeting its statutory audit deadline of October 31. It achieved audit sign-off on December 22.

Its annual report for the year earlier was nearly a year late after auditors were said to be “working through complex issues with the accounting of Crown Regional Holdings’ loan and investment portfolios”.

This year, its board said delays were due to “delays experienced in receiving information from third parties” and said it “will be working with Audit New Zealand to ensure the audit clearance is achieved on a timely basis going forward”.

The annual report noted one borrower, Rotorua wellness provider QE Health, had entered liquidation after the balance date.

A liquidator’s report filed last year said QE Health owed $14m to creditors, with the largest being CRH, which was owed $8m.

The Crown entity’s annual report suggested this loan had already been fully impaired as it “had appropriately considered this change in circumstance”.

Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won more than a dozen awards for his journalism – including twice being named Reporter of the Year – and joined the Herald in 2014 after having spent the decade prior reporting for business newspapers and national magazines.