Sale of MPMH Ltd by NZF Group
Sale of MPMH Ltd by NZF Group
Liberty Financial (Liberty) has responded to inaccurate statements made by NZF Group (NZF) in its Notice of Special Meeting to its shareholders regarding the sale of MPMH (Mike Pero Mortgages) to Liberty. Liberty believes that it is important that all stakeholders correctly understand the circumstances leading to the current position.
Liberty and NZF entered into a Joint Venture Agreement to purchase Mike Pero Mortgages in 2006 on the basis that both parties would contribute operationally and financially to the development of Mike Pero Mortgages. It became clear after a series of business divestments, including but not limited to the sale of NZ Home Loans, senior management and director departures, regulatory scrutiny plus the significant deterioration in its financial position, that NZF had ceased all or substantially all of its business operations and was no longer able to contribute operationally or invest in MPMH as intended by the joint venture. Over this same period, Liberty has expanded its operational capabilities to include deposit taking which contrasts with NZF Money which has instead been placed into receivership.
NZF attempts to justify these changes by now describing itself as an investment company but Liberty disagrees with this claim. NZF has not described itself as such in announcements, financial statements or its website and certainly did not at the time the Agreement was entered into. An investment company would not have been able to contribute operationally to MPMH which formed the very basis of the joint venture. The further deterioration in NZF’s financial position has also meant it is clearly unable to further invest in the MPMH business which is required for MPMH’s future success.
Accordingly, Liberty commenced legal action under the Joint Venture Agreement in late 2011 requiring NZF to transfer its shares to Liberty. This action was opposed by NZF until August 2012 when NZF (finally) agreed to abide by the terms of the Joint Venture Agreement and to sell its shares in MPMH to Liberty at a price determined by an independent valuation jointly commissioned by both parties. Both NZF and Liberty are bound by that independent valuation which was completed in November 2012 with the share sale to be transacted very soon afterwards. The share sale has still not been completed as this has been constantly delayed by NZF for a variety of reasons.
In 2010, Liberty’s nominated directors requested a thorough review and impairment test of the carrying value of Mike Pero Mortgages business in MPMH, which resulted in a write down in 2010. Subsequent impairment tests in 2012 and 2013 could not be agreed by the directors of MPMH and so the MPMH accounts for 2011 and 2012 have not been finalised. The recent independent valuation supports the decision by Liberty’s nominated directors not to approve the MPMH accounts for those years. Although MPMH, being the company that actually owns the Mike Pero Mortgages business, was unable to finalise its carrying value, NZF nevertheless elected not to impair the investment in its accounts even when the results of the recent independent valuation were known.
In its Notice, NZF refers to a disputed loan of $306,000 due from MPMH to NZF. This loan has been questioned by both MPMH and Liberty and is a further impediment to the completion of the MPMH accounts. The independent valuation refers to the loan but does not attempt to independently verify it. Despite repeated requests from MPMH and Liberty to provide relevant documentation, no such documentation has been made available by NZF. The Notice incorrectly implies that only Liberty disputes the loan whereas MPMH itself also disputes the loan after obtaining independent legal advice. Furthermore, NZF’s own auditors have been unable to locate or identify any loan documentation.
NZF claims that the alleged loan relates to a reimbursement of expenses incurred in establishing MPMH. Therefore, in the interests of resolving the dispute and instead of burdening MPMH, Liberty has offered to make an ex gratia payment of $279,853 which is the amount sought by NZF less establishment costs incurred by Liberty on the same basis as alleged by NZF. NZF has chosen not to disclose this in its Notice and prefers to encumber MPMH with a loan that cannot be independently verified.
In its Notice, NZF also wrongly asserts that Liberty by its “conduct will continue to erode the value of MPMH” and that Liberty will “conduct itself in a manner that erodes the value of the Mike Pero Mortgages business”. Peter Rollason, Executive Director at Liberty said, “NZF has declined to correct these completely untrue statements and we reject the accusations made. Actions taken by Liberty have been to ensure that NZF carry out its obligations under the Joint Venture Agreement. In accordance with that Agreement, NZF has agreed to sell its shares in MPMH to Liberty at a price determined by an independent valuer jointly commissioned by both parties. That independent valuation was carried out nearly six months ago yet NZF still delays completion. It is this continued delay to resolve the dispute which impacts the business.”
Rollason added, “There is no rational reason for Liberty, which has consistently expressed a willingness to increase its investment in Mike Pero Mortgages, to erode the value of the business. Liberty continues to provide management and infrastructure support to Mike Pero Mortgages as well as the capacity to develop new products and services. Our intention is to further support growth of the business and to ensure it maintains and enhances its reputation as a leading financial services business. We aim to provide a greater level of leadership, direction and investment.”
“It is clearly in the best interests of the business, the franchisees, staff and all stakeholders concerned for these shareholder issues to be resolved as soon as possible. Liberty is committed to this objective and continues to work with the MPM team to build a leading financial services business.”
Liberty Financial is one of Australasia’s leading specialty finance groups. Its businesses include residential and commercial mortgages, motor vehicle and business finance in Australia and New Zealand. It employs approximately 200 professionals and has issued more than $11 billion in domestic and international capital markets. Since 1997, Liberty has helped more than 120,000 customers achieve their financial goals.