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Money Managers double whammied

Investors told their $20 million bond won't be repaid on time and Securities Commission suspends First Step investment statement.

Friday, April 27th 2001, 10:50PM

by Philip Macalister

New Zealand's largest financial planning firm has hit two major snags this week. First up the Securities Commission has suspended the investment statement for Money Managers' highly popular First Step mortgage funds.

Secondly, 1700 investors who put money into the Metropolis property development are about to get a letter from the trustee saying that the $20 million bond issue won't be repaid on the due date - May 20.

Marketing manager Al Scott says the trustee, Tower Trust, is sending a letter to bondholders telling them that it is "unlikely the developer will be in a position to repay the bonds (on the due date)."

Investors put $21 million into the bonds and there is a further $4 million due to be paid out in compound interest.

Scott says Money Managers are "reasonably concerned" about the missed payments, especially since it was not made aware of any problems until quite recently.

The Metropolis Subordinated Property Bonds were issued in September 1998 and offered to pay investors 14% annually, over an estimated term of 19.5 months.

The money raised was used to refinance existing mezzanine debt of the Metropolis development in Auckland's High Street. The 38-level development consists of 345 apartments and 23 penthouses with 17 retail/commercial premises and 210 carparks.

Scott says the problem is that the developer hasn't managed to sell as many apartments as forecast, consequently the money isn't available to repay the bonds. While the news seems bad investors still have their security and refinancing packages are currently being negotiated.

On top of the Metropolis problems, the Securities Commission has suspended the First Step investment statement over the issue of fees.

First Step is a series of four mortgage funds which were set up in September last year to replace traditional contributory mortgage funds and to take on the mainstream mortgage backed trusts. It has been highly popular with Money Managers' clients, attracting more than $125 million since launch date. (Previous story)

Money Managers promote the fund as having no fees, however the manager, Securities Registries Limited, take a portion of the margin, that is between the money invested and what is paid to the investors.

Scott says the "no fees" marketing is based around the fact that the fund has no entry or exit fees.

He says the issue is "semantic". However the company is happy to meet the Securities Commission's demands and has withdrawn the investment statement and all other advertising.

Since there is no investment statement for the product, Money Managers can't promote the funds.

"We are not too concerned about it," Scott says.

He says the company is working to fix the problem: "We want to comply (with the commission)."

Scott says the tax structure of the trusts is not under question.

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

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Lender Flt 1yr 2yr 3yr
AMP Home Loans 7.24 ▲5.79 ▼6.19 6.65
AMP Home Loans $200k+ 7.14 ▲5.69 ▼6.09 6.55
AMP Home Loans LVR <80% - - ▼5.75 6.19
ANZ 6.74 6.15 6.39 6.49
ANZ Special - 5.69 5.75 6.09
ASB Bank 6.75 6.09 6.40 6.65
ASB Bank Special - 5.70 5.75 6.19
BankDirect 6.75 6.09 6.99 6.65
BankDirect Special - 5.70 5.75 6.19
BNZ - Classic - - 5.75 ▼5.85
BNZ - GlobalPlus 6.74 5.89 6.39 6.59
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.15 - - -
BNZ - Rapid Repay 6.74 - - -
BNZ - Std, FlyBuys 6.74 5.89 6.39 6.59
BNZ - TotalMoney 6.74 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.45 6.05 6.20 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 6.45 - - -
Lender Flt 1yr 2yr 3yr
General Finance 5.95 6.25 6.50 7.10
HBS Bank 6.65 5.85 5.99 6.19
HBS Special - - - 5.89
Heartland 6.70 7.00 7.25 7.85
Heretaunga Building Society 6.70 6.00 6.50 -
Housing NZ Corp 6.74 5.99 6.39 6.59
HSBC Premier 6.84 ▼5.69 ▼5.75 ▼5.99
HSBC Premier LVR > 80% - - - -
HSBC Special - 5.39 - -
ICBC 6.75 5.99 6.39 -
Kiwibank 6.65 5.79 ▼6.19 6.65
Lender Flt 1yr 2yr 3yr
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset 6.55 - - -
Kiwibank LVR > 80% - - ▼5.75 6.19
Liberty - - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.95 6.15 6.60 -
NZ Home Loans 6.85 6.09 6.40 6.65
Perpetual Trust 7.70 - - -
Resimac 6.59 6.35 6.58 6.77
SBS Bank 6.65 5.85 5.99 6.19
SBS Bank Special - - - 5.89
Lender Flt 1yr 2yr 3yr
Silver Fern 5.95 6.10 6.55 7.05
Sovereign 6.85 6.09 6.40 6.65
Sovereign Special - 5.70 5.75 6.19
The Co-operative Bank 6.70 5.70 ▼5.75 ▼6.09
TSB Bank 6.74 5.95 6.19 6.30
TSB Special - - 5.79 -
Wairarapa Building Society 6.20 5.75 5.95 -
Westpac 6.59 6.09 6.39 6.65
Westpac - Capped rates - 6.74 6.99 -
Westpac - Offset 6.59 - - -
Westpac Special - - 5.75 6.19
Median 6.70 6.00 6.39 6.55

Last updated: 31 October 2014 8:39am

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