Visy boss Anthony Pratt says the ‘time has come’ for super fund lending

Visy boss Anthony Pratt is at the vanguard of business borrowing from Aussie super funds, and says there’s much more to come.

Visy chairman Anthony Pratt.

The Visy packaging and paper group has borrowed some $700m from Australian super funds, to help generate the finance for some of its major new investments, its executive chairman, Anthony Pratt told a business conference on Tuesday.

Mr Pratt said there was now an increasing trend for major superannuation funds in Australia to consider providing long term financing for some of the country’s largest companies.

“We have borrowed $700m from Australian super funds,” he said.

He said the $500m of this was being used to fund a glass bottle making facility in western Sydney, which is part of its goal to boost the recycling of its glass bottles from 30 per cent to 70 per cent across Australia.

Other funds would be used on programs to reduce waste going into landfill.

Mr Pratt said some 100 deals had been done since 2015 for Big Australian companies to borrow from major super funds, such as the $260bn AustralianSuper and industry super fund investment vehicle, the $150bn IFM Investors group.

Mr Pratt said in the past Visy had sought long-term financing, of some 20 to 40 years in maturity, from the private placement markets in the US from big institutional investors such as insurance giant, MetLife.

But he said now the market in Australia was opening up for it to borrow from local super funds.

He said Visy’s $700m in funding had been arranged by Westpac, which had assessed the credit worthiness of the investment which was needed by the super funds.

Mr Pratt said in the US some 40 per cent of the big pension fund investments were in debt financing for companies, with 60 per cent invested in other areas such as equities and property.

But only 1 per cent of the investments of Australian super funds were in loans to companies.

He said that as the Australian super fund sector matured, the funds would be allocating more of their funds towards paying out annuities and pensions.

He said making long-term loans to companies would generate long-term stable cash flow, which could help finance this shift in their business models.

“The time has come for super fund lending in Australia,” he said.

“It is for the benefit of policy holders. They get to see a diversification of risk and it is great for nation building and the creation of Australian jobs.”

Mr Pratt, whose company runs the world’s largest privately owned recycling business, said that there was a big push against the use of single use plastic which he said was “going the way of the dodo bird.”

He said Visy was shifting towards more use of paper in its packaging and moving away from forms of packaging like bubble wrap.

The company was also moving to become much more self sufficient in its operations.

This included looking to generate more of its own energy, stepping up its recycling operations and moving towards greater use of clean energy.

“We’re very focused on becoming totally self sufficient,” he said.

He said the shift to more digitisation would see the company place computer chips in its boxes which could monitor the heat of the package.

Mr Pratt said the food industry was Visy’s biggest single customer.

Current trends, he said included servicing companies selling directly to consumers such as lobster farmers in Maine in the US who might ship their product directly to customers.

Having the right packaging was key for this to operate, he said.