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Metropolis bondholders get bad news

Metropolis bondholders are being told they are now unlikely to get all their principal back.

Monday, August 5th 2002, 10:22PM

by Philip Macalister

People who invested in the Metropolis property bonds are now being told they are unlikely to get all their principal back.

Some time after developer Andrew Krukziener defaulted on the bond repayment in May 2001 he said that investors would get all their principal back, but may have to forgo any outstanding interest.

The trustee for the property bond issue, Tower Trust, has written to the 1700 people who invested a total of $21 million in the downtown Auckland property on the current state of affairs.

General manager Glenn Clark says they are only likely to recover between 50c and 80c of each dollar invested.

Tower Trust says that based on the recent sales history the recovery is likely to be around the 80c mark. However it says that if sales are made on a forced sale basis, the recovery could be as low as 50 cents.

This forecast is based on the prices currently being fetched for Metropolis properties and a valuation which was done by Tower in April, but has been kept secret.

"Based on the valuation held and the recent sales history, Tower Trust forecasts that the recovery of your investment is unlikely to exceed 80 cents per dollar invested," Clark says in his letter.

As trustee Tower faces a number of problems in sorting out the matter. The first is that it can't take any action against the developer until the ANZ's secured loan is paid off.

"No action can be taken to enforce the redemption of the bonds before the bank debt is repaid," Tower Clark says.

However, the good news is that he predicts that the loan will be paid off in full by the end of the year.

The other major problem is that Tower Trust is still being kept in the dark about the project and knows very little about the state of the development company and its finances.

Its main information is that the loan from the ANZ has been reduced from about $20 million to $5.7 million.

"We have relied upon Krukziener Properties Ltd for the amount owing to ANZ Bank and we have made an estimate of costs without the benefit of knowing the financial position of the development company or the costs involved in running the development company to sell the properties over time. "

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

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