C+M Recovery Likely Low; Concern re. Transactions
18 July 2008
C + M Finance Recovery Likely To Be Low – Concern About Some Transactions Not Being Appropriate
Tim Downes and Richard Simpson of accounting and business advisory firm Grant Thornton, acting as first receivers for Capital + Merchant Finance, say that the finance company’s debenture holders are now likely to receive a recovery of only 8% at best of their investment, compared with an original estimate of 14% to 59% long term.
When combined with the expected full recovery for Fortress, who appointed the receivers under their priority charge, the overall forecast recovery comes out at 18%.
In their six-monthly report on the state of affairs of the failed finance company, the receivers also say they are concerned about the appropriateness of a number of transactions “and we continue to investigate these along with agencies such as the Securities Commission.”
The receivers note that the preliminary estimated range of recovery reflected considerable risks and uncertainties relating to the recoverability of certain loans.
“Unfortunately, the poor quality lending, the deteriorating property market and lack of alternative credit to facilitate refinancing options have had an adverse effect on our ability to recover outstanding loans and assets,” they report. “As a consequence, we now revise our estimate of recoveries to debenture holders to a recovery of up to 8% of their investment.”
Gross recoveries of $42.8 million have so far been realised from 55 loans with a total book value of $182.6 million. Of this amount, $13.4 million has been repaid to Fortress, the balance having been paid to prior ranking security holders or applied to the costs of running the receivership.
The receivers say further sales and settlements are pending, but realisation of the loan portfolio will be a complex and time-consuming process.
Dealing with their investigations along with the Securities Commission, the receivers add:
“We are also aware of concerns raised by investors and other parties in respect of certain activities of the company and certain parties, prior to receivership. As a result, thorough investigations are taking place in respect of:
• Specific transactions entered into by the
company prior to our appointment
• The activities and conduct of the company, the officers of the company and third parties leading up to the appointment of receivers
• Any other matters that come to our attention.
“Due to the legal consequences and the nature of these investigations, we are unable to provide details regarding these issues or our findings to date.”