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Strategic Finance mulling the Hanover route as receivership threat loo

Strategic Finance is mulling over a similar debt-for-equity route that got Hanover Finance and its associated companies out of trouble last year as the threat of receivership hangs over its head.

Thursday, February 11th 2010, 10:11PM 4 Comments

by Paul McBeth

The finance company sparked two event reviews last month after it missed its first repayment to investors and had to increase its provisions for bad loans to less than three-quarters of the principal monies owed to debenture holders, depositors, and subordinated note holders, and has been in negotiations with trustee Perpetual Trust over its future since then.

Chief executive Kerry Finnigan told depositrates.co.nz that they are looking at more than six proposals to save it from collapsing, including a debt-for-equity option much like the $400 million Hanover-Allied Farmers deal last year.

"The proposals fall pretty much into two camps - one looks at us as distressed debt for the interested parties and is not necessarily in the best outcome for investors, while the other is a debt-for-equity and cash component," he said. "We have quite a bit of opportunity to try and get a good result for our investors."

Finnigan said Strategic has been in weekly discussions with Perpetual Trust to ensure they are making progress and to keep it abreast of the situation.

"We don't think receivership delivers the best result for our investors" though ultimately it will be up to the trustee to make that call, he said.

Finnigan said they are working through the proposals and he expects to make an announcement in the foreseeable future.

The finance company went into a moratorium at the end of 2008 after it had frozen repayments to some 15,000 investors who are owed about $325 million.

 

Paul is a staff writer for Good Returns based in Wellington.

« South Canterbury Finance faces billion dollar liquidity riskFailed finance companies net PwC more than $10mill »

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Comments from our readers

On 12 February 2010 at 8:21 am John S said:
As a strategic investor I am NOT interested in providing a failed CEO with questionable ethics an "oportunity" to get a "good" result. Put the bloody thing into recievership get back what we can and get on with our lives. There is a high cost to debenture holders in waiting while the CEO and remaining staff continue to collect salaries and puddle about!!!!!
On 12 February 2010 at 10:15 am Bryan Preston said:
Having come this far we should await the alternatives.The Hanover result is certainly evidence that more positive results can be made rather than a short-term low return result eg receivership.
On 13 February 2010 at 9:18 am Bill Munro said:
I agree with Bryan. When in panic mode you don,t make good decisions
On 13 February 2010 at 2:50 pm Bob said:
No it isn't, Brian. There is no evidence whatever that Allied Farmers will do any better. If it fails Hanover debenture holders who have lost any claim on the assets will be holding worthless shares. Receivership would have guaranteed some return. The same would apply to Strategic.
Commenting is closed

 

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