More Than Half of Crown Regional Holdings Loan Book 'At Risk' as Defaults Rise

More than half of the $257 million loan book managed by Crown Regional Holdings (CRH), a government-owned entity formerly known as the Provincial Growth Fund, is now considered at risk of default or impairment. This revelation comes from the long-delayed annual report published to Parliament last week, which highlights a significant increase in risky lending practices over the past year.

The report, covering financial activities up to June 2024, shows that 54% of the total loan book was deemed to be at a “significant increase in risk” of default — a sharp rise from 40% in 2023 and 14% in 2022. This growth in at-risk loans has been attributed to a combination of difficult economic conditions and the nature of the investments, which often target sectors that traditional banks are reluctant to support.

Over the past three years, the net loan book has expanded from $173 million to $256 million, despite the need for substantial impairment provisions. In 2024 alone, CRH recorded $19.3 million in loan impairments — an increase from $17.4 million the previous year. These provisions now account for around 7% of the loan book.

CRH’s chair, John Rae, acknowledged the growing risk in his foreword to the report, noting that the rise in at-risk loans was not unexpected given the challenging macroeconomic environment. He emphasized that the entity’s focus on underbanked sectors inherently increases the level of risk associated with its investments.

One of the most significant investments by CRH is the $110 million allocated to the expansion and development of Ōpōtiki Harbour. In addition to loans, CRH has also made equity investments in regional businesses, including a $52 million stake in Whakatōhea Mussels, a company that has been losing money for years.

Not all of CRH’s equity investments have been a financial drain. In 2024, the entity was able to revalue its stake in lithium and silica extraction startup Geo40 from $7 million to $6.2 million after the company resumed production and secured a secondary market share sale. Geo40 also received a $10 million loan from CRH.

The release of CRH’s 2024 report was delayed for nearly a year due to the complexity of assessing its loan and investment portfolio. Audit NZ expressed concerns about ensuring that risks were appropriately addressed. Despite the delays, the report was finally tabled to Parliament on July 10.

The audit note attached to the 2024 report was identical to that of the previous year, emphasizing the challenges in estimating the value of loans and securities, as well as the determination of discount rates and expected credit losses. With further defaults expected, CRH has noted that three additional loan recipients have entered liquidation since the balance date.

One of the most notable cases is that of Cherri Global, a Hawke’s Bay cherry producer that received a $5 million loan from CRH to recover after Cyclone Gabrielle. Less than 18 months later, Cherri Global collapsed into liquidation, leaving CRH as one of the unsecured creditors owed $42 million.

Other high-profile defaults include Sustainable Foods, a plant-based food manufacturer that entered voluntary administration and left CRH with an expected shortfall of $895,616 on its $1.4 million loan. Timber wholesaler Guru NZ also collapsed into liquidation, leaving CRH with a claim of $773,085.

As CRH continues to face mounting financial challenges, the government and regulators are under pressure to ensure that the entity’s risk management practices are robust enough to prevent further losses. With the next report expected to reveal more write-downs, the future of CRH’s investment strategy remains uncertain.

Matt Nippert is an investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won multiple awards for his journalism and joined the Herald in 2014 after working in business newspapers and national magazines.