Bhp Share Plan Loans: What To Do
Illawarra Mercury
Thursday June 6, 2002
A leading Wollongong stockbroker has advised thousands of Port Kembla steelworkers that they do have a choice in deciding what to do about repaying outstanding BHP Billiton Employee Share Plan loans.
Loans for the share plan will be repayable when the BHP Steel spin-off occurs on July 2.
The impending spin-off will leave thousands of steelworkers and their families with three alternatives, according to Challenger First Pacific senior adviser Doug Symes:
Sell shares, pay out the loan and walk away.
Sell enough shares to pay out the loan and retain the rest.
Use existing shares as security for finance.
Mr Symes said Challenger First Pacific was one of a number of organisations offering finance to Port Kembla steelworkers.
The average amount owed by Illawarra steelworkers is thought to be between $40,000 and $50,000.
He said employees with 10,000 shares, worth around $100,000, could borrow $70,000 from brokers such as Challenger First Pacific that will lend 70 per cent of the value of the existing shares with no other security.
Challenger estimates that over two years the BHP Steel share price will increase by $5.50 and that translates to a capital increase of $55,000 on 10,000 shares, with a tax deductible interest expense of less than $8000.
Mr Symes said that, provided the forecasts were correct, for a $50,000 loan shareholders would be around $47,000 better off.
He said there was no guarantee that people would actually make that amount but if steelworkers sold their shares to pay out their loan before the spin-off they were potentially throwing away the opportunity of making it.
He said finance like that being offered by Challenger's share finance facility gave steelworkers a choice of taking out a loan to potentially make a profit rather than just selling the shares out and walking away.
Mr Symes said a number of financial institutions in the Illawarra were also offering loans to steelworkers.
City Coast Credit Union business development manager Jason Kriss said that credit union, which was the Australian Iron & Steel Credit Union until 1986, owed its origins to BHP employees.
And close to 5000 employees still utilise its payroll services.
The credit union has an Employee Share Plan offer with four loan options including a mortgage secured loan, bill of sale security over a vehicle, freeze security and an unsecured loan.
Mr Kriss said loans could be organised on the phone and same day approval was offered in some circumstances.
``We are offering a solution that meets their needs," he said.
© 2002 Illawarra Mercury
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