Strategic Finance receivers failed to find credible offer for loan book
Nov. 19 (BusinessDesk) – Receivers of finance group Strategic Finance couldn’t tempt any potential buyers of the loan book to make a credible offer and will continue with recoveries on behalf of 10,000 debenture holders owed $368 million.
Offers received “fell short of even our ‘low’ estimate of gross recoveries from the loan book,” John Fisk and Colin McCloy of PricewaterhouseCoopers said in their first six-monthly report. “We consider that the best possible outcome for secured debenture investors will be achieved via the receivers continuing to realize the loan book.”
Bidders made low-ball offers because of the high proportion of second mortgages, the threat of enforcement action by prior-ranking creditors and the complexity of arrangements with Strategic affiliated companies. About 58%, or $131 million, of the net loan book as at Feb. 28 is in second mortgages. The receivers’ preliminary estimate for gross recoveries, prior to costs, is 12 cents to 35 cents in the dollar.
The report shows the proportion of Strategic’s lending into formerly hot parts of the property development market, with a concentration of loans in Queenstown and Northland, where other distressed lenders are trying to recoup their money. Money was lent on bare land development sites of where further funding was required and other creditors had a prior call, the receivers said.
In addition, loans were made on overseas property, such as in Fiji, where recovery was hampered by a difficult political situation.
Of Strategic’s 87 loans, about 25 were to borrowers either in liquidation, receivership or had property that was in the process of being sold by the first mortgagee.
For the period of the receivership from March 12 to Sept. 12, some $4.87 million was recovered from the loan book, while payments for various costs and fees amounted to $2.6million, leaving net funds received at about $2.98 million.
Strategic was sent to the receivers in March by trustee Perpetual Trust, ending a moratorium arrangement that had been in place since December 2008.
The finance company missed its milestone repayment on Jan. 7 after it failed to generate enough loan recoveries, and later had a liquidator appointed.