Bendigo looks to Southern

Southern Finance says it froze redemptions to allow negotiations for the proposed sale to Bendigo and Adelaide Bank to move ahead. The company stated the suspension was intended to ensure "fair and equal treatment of all investors" in Southern Notes while the transaction is progressed.

Bendigo and Adelaide Bank has entered into a non-binding heads of agreement to acquire Southern Finance's assets for an undisclosed amount. Southern said it was working with Bendigo and Adelaide Bank with the aim of finalising a binding agreement by December 3.

The article reports Southern Finance has about $290 million of investor funds on deposit tied up in Southern Notes.

Southern's chief executive Ashley King said he expects access to Southern Notes to recommence after the suspension period ends, provided Southern and Bendigo and Adelaide Bank successfully conclude the proposed transaction. The exact timing depends on the outcome of those negotiations.

Southern raises funds from investors and on-lends them for construction and business lending. Its loan book specialises in equipment finance and commercial property assets, and the company also operates a financial planning business.

The sale of Southern comes on the heels of last month's collapse of regional non-bank lender Banksia Group, which put up to $660 million of investor funds in doubt. The Banksia situation prompted increased regulatory attention in the sector.

The Australian Securities and Investments Commission (ASIC) has set up a taskforce to regulate the debenture industry in the wake of the Banksia collapse, according to the article.

Investors should watch for announcements from Southern Finance and Bendigo and Adelaide Bank about the proposed transaction, noting Southern aimed to have a binding agreement finalised by December 3. The company has indicated it expects redemptions to resume if the proposed deal is successfully concluded.