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Bluestone offer for Geneva frustrated

Bluestone has confirmed it wants to make an offer for the assets of Geneva Finance and is frustrated neither Geneva's board nor its trustee will entertain its approach.

Wednesday, April 23rd 2008, 5:16AM

by Philip Macalister

"We are struggling to make progress," Bluestone Group chief executive Peter McGuinness says.

Geneva debenture holders are due to vote, on Monday, on a reconstruction proposal where they swap some debt for equity and wait around four years to get fully repaid. The alternative is receivership.

McGuinness says Bluestone would like to carry out due diligence and make a cash offer to debenture holders where they get around 85% of their investment back straight away.

Geneva's board has confirmed it has received a letter from Bluestone Capital Management and says that letter does not contain any offer.

Bluestone says it would like to make an offer but first needs to do some form of due diligence.

It says it has a team and funders in place to do this and could make an offer within four weeks.

Bluestone has asked that Monday's vote is put back four weeks.

McGuinness says there is nothing to lose by postponing the meeting for four weeks, and that the reconstruction proposal can be kept on the table.

He says Bluestone would like to give debenture holders a third option.

However, Geneva has used a legal tack to stymie the request. In a release issued last night it said "under the Trust Deeds it is not possible to put forward any further resolutions at the meeting without the requisite 17 day notice period."

McGuinness says Bluestone first started talking to Geneva in February about "another style of transaction" and it wasn't until March that it started talking about an asset sale.

He readily acknowledges that a proposal to buy the assets has "come late in the piece".

Bluestone says it can't put a firm offer on the table without doing due diligence and that it is unlikely to pay par value for the assets.

However, it has talked about debenture holders getting a cash payment of 85 cents in the dollar, compared to the Geneva offer where debenture holders swap some debt for equity and wait nearly four years for repayment.

Geneva says, in its statement, that it has "been open about having invited potential institutional investors, since November 2007, to investigate possible equity involvement and/or a sale of the loan receivables or business."

Bluestone doesn't doubt the first part but seriously questions whether Geneva has really tried to sell the company's assets.

"We're not wildly convinced they formally marketed the assets," McGuinness says.

Geneva goes onto suggest that if its reconstruction plan is approved that "removes the financial uncertainty for existing investors and will place the company in a position of strength to negotiate with interested parties including Bluestone."

However, Bluestone says that once the deal is done and debenture holders swap debt for equity, it is very difficult to "unwind" the changes.

« Receivership better ending for Kiwi Finance: TrusteeFirst finance company PIE fund »

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