by Paul McBeth
Ballantyne property bondholders have been presented with a tough choice: go for a quick payout before Christmas or hang in there for three years with the prospect of a lot more money.
The Ballantyne bond raised $8 million from the public in 1998 to fund the development of a golf course and residential development near Tauranga. The 600 bondholders received initial interest payments but the project's developers defaulted on the last payment in mid 1999.
While bondholders agreed to a rescue package in April, the developers involved in this proposal subsequently withdrew. The trustee, Tower Trust, called in receivers to the Ballantyne group of companies in late June.
Tower Trust has now sent out a letter to bondholders with two further proposals and asked for their views. One's for a straight cash sale of the development (which has the golf course and some buildings completed) but which, after costs, will only amount to about $3.3 million.
The other is a complex workout whereby bondholders leave their money in for up to three years so a new developer, Auckland-based Charta Ltd, can manage the project. Their projected return is $8 million over that period via progressive sales of the residential sections and golf course.
Tower Trust met again with receivers yesterday and General Manager New Zealand Glenn Clark said that further information on Charta's proposal was now available to send to bondholders. The trustee would decide in the next day or so whether to call a meeting or to circularise the information.
Aside from providing some certainty for bondholders, a decision needs to be made smartly for at least two other reasons. The golf course is running at a loss (more than $7,000 a week in August) and also the cash offeror won't wait around indefinitely.
Clark said that bondholders would need to consider the implications of Charta's offer carefully, given that they would effectively be taking on the development risk for the project themselves.