Provincial Finance dismayed by receivership

Media Release from David Lyall and John Edilson

2 June 2006

Provincial Finance dismayed by receivership

The chairman of Provincial Finance Limited David Lyall described the actions of the Perpetual Trust to place the company into receivership as “disappointing” and “surprising”.

Perpetual Trust, as trustee for the debenture holders has appointed PricewaterhouseCoopers as receivers.

The Trustee’s action comes despite the efforts of Provincial Finance’s owners, Mr Lyall and chief executive officer John Edilson, to find alternative solutions.

“Meetings have been held today with South Canterbury Finance Limited’s chairman Allan Hubbard and others in the industry to put together a package to support the company,” Mr Lyall said.

“We are very disappointed with the Trustee. We have bent over backwards to accommodate its concerns. Only 2 days ago we offered to inject a further $16.5 million into the company and sell $25 million of the property loan portfolio to South Canterbury Finance.

“However, in spite of our willingness to resolve the issues the Trustee, without warning, dropped a bombshell on us by calling in the receivers,” Mr Lyall said.

“We believe this was avoidable and puts at risk the interests of debenture holders who may not now receive back 100 per cent of their investment.”

“Over the last six months we have injected $27 million into the company so this was never something we were running away from. All I can say it that it is very disappointing that the Trustee has chosen to act in this way.”

The draft accounts for the year to 31 March 2006 had shown an after tax loss of $36 million after providing for $85 million in bad and doubtful debts, Mr Lyall said.

It was now clear that Provincial Finance had expanded too rapidly into the area of motor vehicle finance and was experiencing a higher level of non-performing loans than anticipated. Recoveries had been further impeded by the slowdown in the sale of new and used cars, he said.

In the last year Provincial Finance has boosted its specialist debt recovery team and improved systems to manage borrowers who are experiencing difficulties maintaining loan repayments.

“Notwithstanding the present situation we are actively pursuing a re-capitalisation of the company and we are confident of a positive outcome.”

“The support and loyalty of our debenture holders and brokers has been humbling. All our efforts are now focused on finding the funding necessary to regain control of the company and build on that support.”

ENDS

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