GFNZ gains banking covenant breach waiver; writes off $2.4m more

Geneva Finance, has gained a formal waiver of its banking covenant breach and has increased its reported annual net loss to $8.6 million after deciding to write off its $2.4 million deferred tax asset.

Thursday, June 30th 2011, 9:41PM 1 Comment

by Jenny Ruth

In mid-June, just after GFNZ released its results revealing the covenant breach, the Financial Markets Authority (FMA) ordered it to stop issuing debentures under its May 12 prospectus while it investigated.

GFNZ managing director David O'Connell says that prospectus would have expired today in any case and his company had already voluntarily withdrawn the prospectus before the FMA action and had not accepted any new money.

"We received inquiries but we accepted no money," O'Connell says.

GFNZ plans to file a new prospectus "in the normal course of events," he says.

The banking covenant with Bank of Scotland related to new lending and at March 31, GFNZ said it was $0.4 million, or about 32 loans, short of the required target. The company had said it could have met the target if it had been prepared to lower its asset quality standards.

GFNZ says its directors had reviewed the treatment of its deferred tax asset after its auditors decided to tag its accounts with a "fundamental uncertainty" clause about the value of the asset.

"The directors have since resolved to take a more conservative approach in reporting the group's financial position and write off the deferred tax asset," it says.

The write-off is non-cash and there is no change to the legal status of its tax losses which will still remain available to the company to offset against future income, it says.

The asset is already excluded from GFNZ's regulatory and funding covenants, it says.

The write-off will reduce GFNZ's total assets to $61.1 million and its net equity to $10.6 million.

The FMA says its investigation is ongoing.

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