NZF Group: receivers won't let it pay interest on capital notes
NZF Group says the receivers of its former finance company won't let it pay interest on its capital notes.
Monday, May 21st 2012, 11:22AM
by Jenny Ruth
NZF's assets have been frozen by the High Court pending a substantive hearing on the NZF Money receivers' claims the directors of both companies, who were the same people, grossly undersold an NZF Money subsidiary to the parent company in October 2010.
No date has been set for the substantive hearing.
NZF is alllowed to make payments "in the ordinary course of business," provided the receivers, Grant Graham and Brendon Gibson of KordaMentha, consent.
NZF is due to pay about $270,000 in interest next month on the $18 million of capital notes.
"NZF Group approached the receivers and requested their prior consent to the interest payment on the basis that it is an ordinary course of business expense," says chief executive Mark Thornton.
"The receivers have declined to give consent to that payment and refuted that it is an ordinary course of business expense," Thornton says.
Accordingly, NZF's board believes it must suspend interest payments on the notes until after the substantive hearing.
Back in March, NZF said it would probably be forced to convert the notes to equity. If converted at the current share price, 0.3 cents, the resulting 6 billion shares would swap holders of the existing 110 million shares on issue.
Back then, NZF said it had sufficient cash to pay interest on the notes for at least the next 18 months if the company made no new investments.
As well as the receivers' legal action, NZF is also facing legal action by joint-venture partner Liberty Financial over its 50% of Mike Pero Mortgages and investigations by both the Serious Fraud Office and the Financial Markets Authority.
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