Citycare acquired property maintenance company Spencer Henshaw for $71 million in mid-2022.
A major maintenance company owned by Christchurch ratepayers will no longer pay a dividend as it must repay a $56 million loan.
Citycare, a nationwide construction and maintenance company owned by Christchurch City Council, was given the loan in mid-2022 by the council’s investment company, Christchurch City Holdings Ltd (CCHL).
The loan enabled Citycare to buy Auckland-based property maintenance company Spencer Henshaw for $71 million. The sale was completed on 1 September.
The other $15 million to acquire the business was funded by Citycare, which sold a large industrial estate in Hornby.
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A spokesman for Citycare said the company has suspended dividend payments because it prioritized repayment of debt to CCHL.
“CCHL and Citycare Property have agreed a debt repayment threshold which will trigger the commencement of dividend payments,” the spokesman said.
The spokesman declined to say what the threshold was.
In the last financial year, Citycare paid out a dividend of DKK 2.6 million. USD. The year before, it paid DKK 4.5 million.
A CCHL spokesman said the suspension of Citycare dividends would not change the total dividend it intended to deliver to the council.
CCHL plans to pay the council DKK 32.4 million. USD in the financial year 2022-23.
Council documents show Citycare will also no longer meet a $327,000 target for its annual interest costs.
The target was set before it considered acquiring Spencer Henshaw.
The Citycare spokesman did not say what the company’s annual interest costs would be, but noted that its financial results would include those of the Spencer Henshaw units.
Citycare Property chief executive Peter Lord said in the company’s annual report that the Spencer Henshaw acquisition was “one of the more significant acquisitions supported by our shareholder CCHL in the past decade”.
“I am extremely proud of how our company and our people have performed and of their continued pursuit of business growth and expansion under extremely trying circumstances,” Lord said.
Spencer Henshaw is a property maintenance company with more than 250 employees. It specializes in managing social housing.
Lord said Citycare and Spencer Henshaw shared similar values.
“The fit is excellent and the acquisition will further facilitate and accelerate our growth in the social housing segment of social infrastructure,” he said.
A CCHL spokesman said: “The acquisition gives Citycare a strong position in the social housing sector as part of its social infrastructure strategy.”
The CCHL spokesman said the $56m loan. for the purchase was financed through CCHL’s “Intra Group Funding Facility, which leverages CCHL’s strong credit rating and its trust and reputation in the market”.
Meanwhile, Citycare helped fund the acquisition by selling a six-hectare property on Springs Rd for $14.25m.
Citycare previously used the site to store vehicles and store construction materials. The site also had an asphalt plant, which Citycare also sold.
A spokesman for Citycare said the property and asphalt plant were sold because of the company’s “strategic positioning” in social infrastructure, rather than road maintenance and civil engineering.
Citycare recorded a net profit after tax of $3.7m. in the financial year 2021-22.
At a meeting in December, Christchurch councilors voted 10-7 to develop detailed business cases looking at the costs and benefits of partially selling assets.
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