Rates round-up: May 21

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Compass investments lost; Bridgecorp director cancels appeal; Government bonds bounce back; term deposits heading south

Monday, May 21st 2012, 6:30AM

by Niko Kloeten

The receivers of Compass Capital say they expect a shortfall to secured bondholders and they don't expect unsecured creditors will receive anything.

Grant Graham and Brendon Gibson of KordaMentha, say they continue to pursue claims under Compass' Lloyds insurance policies.

Compass, a vehicle which raised funds from the public and used the money to buy loans from Bridgecorp, went into receivership in March 2009 owing investors $14.5 million.

Bridgecorp itself went into receivership nearly two years earlier.

Investors were repaid $1.06m in June 2010 from money realised from one of its three loans which had a face value of $16.1 million on the date of receivership.

Higher-ranked lenders suffered a shortfall on the other two loans so there were no funds available for Compass.

Bridgecorp director cancels appeal

Former Bridgecorp director Gary Urwin has pulled out of an appeal against his two-year jail sentence for misleading investors.

Urwin was sentenced last month after pleading guilty to all 10 Securities Act charges in November last year, just before his trial was due to begin.

He was planning to appeal against the sentence and argue for home detention, but his lawyer David Reece told APNZ last week that after taking legal advice he would not be proceeding with the appeal.

Fellow former Bridgecorp director Robert Roest was sentenced to six-and-a-half years in jail last Friday.

Government bonds bounce back

Demand for New Zealand government bonds has recovered after a brief slump, with last week's auction attracting strong bidding.

The previous week had seen one auction - for bonds maturing in 2019 - fail, while the auction for $100 of bonds maturing in 2023 attracted only $110 million of bids for a bid cover of 1.1.

However, last week's auction of $200 million of bonds, also maturing in 2023, attracted bids of $693 million for a bid cover ratio of 3.5.

The weighted successful yield was 3.66%, down from 3.75% the previous week.

Term deposits heading south

The recent drop in term deposit rates has continued as banks wage war in the mortgage market.

Last week RaboDirect Rabo cut its three-month term deposit rate by 20 basis points to 3.50%; its nine-month rate by five basis points to 4.25%; its two-year rate by five basis points to 4.75%; and its three-year rate by 20 basis points to 5.00%.

It had cut its six month and two year rates a week earlier.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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