Nothing left for Capital + Merchant investors

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Capital + Merchant Finance is shaping up to be one of the worst finance company collapses, with the receivers saying investors are likely to get very little, if any of their money back.

Monday, February 2nd 2009, 11:39PM

Receivers Grant Thornton initially estimated that Capital + Merchant’s 7,000 investors would get between 14 and 59c in the dollar back.

However, that has been revised to nothing.

This has been put down to poor lending practices, the deteriorating property market and a lack of alternative credit facilities to refinance loans.

“After accrued interest and receivership costs we expect recoveries to be nil for debenture holders from the assets of the company,” receivers Richard Simpson and Tim Downes say.

“We believe the only recoveries for debenture holders will be from insurance claims and legal claims against various parties.”

However, wholesale funder, Fortress, which appointed the receivers, is likely to be repaid in full.

The receivers say they have repaid $20.6 million to Fortress and it is owed a further $2.9 million, including accrued interest.

Capital secured debenture holders are owed $90.7 million and people with investment debentures are owed $76.3 million.

While there is not a lot of good news for investors in the latest receivers report there is a glimmer of hope that there will actually be a payout.

The receivers have not provided for any recovery from the insurance and legal claims. They say that insurance claims could return investors 19c in each dollar invested, however it is up to the second receivers, Grant Graham and Brendan Gibson of Korda Mentha.

In its six-monthly report, dated January 2009, Grant Thornton says it has uncovered more related party lending than previously recorded and has some concerns over the transactions and activities of the company and its officers prior to receivership.

Various investigations are underway by agencies such as the Securities Commission.

Capital + Merchant Finance’s directors at the date of receivership were; Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland.

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