Archive | Financiers

Hawkins’ finance companies guilty on loan contract enforcement

2 finance companies headed by former Equiticorp boss Allan Hawkins have been found guilty in the Auckland District Court on 106 charges relating to enforcement of loan contracts. Sentences haven’t been imposed yet.

Mr Hawkins’ son Wayne was also a director of the 2 finance companies at the time of the events before the court, but resigned in February after setting up his own finance company, ABC Loans Ltd, last December.

Judge David Sharp dismissed another 19 charges due to a lack of certainty about the circumstances in which a lender could continue to charge interest & costs after repossessing & selling consumer goods under a continuing security agreement. The Commerce Commission said on Friday it would seek to have those charges reinstated.

Mr Hawkins’ companies, Budget Loans Ltd & Evolution Finance Ltd, failed in a bid to have 122 of the charges dismissed at a hearing in May on the grounds that the Fair Trading Act didn’t regulate them.

The companies bought National Finance 2000 Ltd’s loan book in 2006 and Western Bay Finance Ltd’s remaining loan receivables in 2008, and sought to distinguish those acquisitions from being “in trade” or “in connection with the supply or possible supply of services”.

Judge Sharp found that “in trade” representations about the 2 companies’ rights to the way they could recover money from debtors was an integral part of their businesses, and he found the companies guilty of representations made to 21 borrowers while enforcing loan contracts.

The commission filed proceedings against the companies under the Fair Trading Act in December 2014 alleging they misled consumers about their rights by:

  • repossessing or threatening to repossess borrowers’ property when they didn’t have a right to repossess
  • adding interest & costs to loan balances after borrowers’ property had been repossessed & sold, when that’s unlawful
  • telling debtors they had to make loan payments at a higher rate than had been set by the court, and
  • telling debtors they had a shorter time to remedy a loan default before their goods were repossessed than they were allowed under law.

The commission previously prosecuted Budget Loans in 2010, when the company admitted 34 charges of breaching the Fair Trading Act by charging interest & fees after it had repossessed & sold items of security on National Finance loans. It agreed to make substantial repayments and was fined $30,750.

The commission started the current investigation into Budget Loans & Evolution Finance in 2012, issued a “Stop now” letter to the 2 companies in November 2013 with regard to one aspect of their conduct while its investigation continued, and filed charges in December 2014.

Allan Hawkins headed the listed Equiticorp Group, which was placed in statutory management in 1989 after collapsing in the wake of the 1987 sharemarket crash. The Serious Fraud Office prosecuted Mr Hawkins & other Equiticorp directors and he was sentenced to a 6-year jail term in 1991. He was released in 1995.

Links:
Commerce Commission, enforcement response register & judgments

Earlier stories:
17 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months

Attribution: Commission release, judgments, Companies Register.

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Heartland buys 10% of HarMoney

Heartland NZ Ltd has taken a 10% shareholding in New Zealand’s only licensed peer-to-peer lending platform, HarMoney Corp Ltd.

Heartland chief executive Jeff Greenslade said on Monday its subsidiary, Heartland Bank Ltd, would also provide a funding line to enable lending to a range of individual borrowers using the platform.

“Heartland’s strategy is to occupy leading positions in niche markets through specialist offerings which are different to traditional banks. Likewise, HarMoney operates a lending model that challenges those being offered by mainstream banks – a model that can change the way people borrow & invest.”

Earlier story:
8 July 2014: Roberts’ HarMoney gets first peer-to-peer licence

Attribution: Company release.

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Roberts’ HarMoney gets first peer-to-peer licence

The Financial Markets Authority issued its first peer-to-peer lending service licence today to startup Auckland company HarMoney Ltd, founded by Neil Roberts.

Mr Roberts spent 4 years at AGC Finance Ltd, 6 years as general manager at Pacific Retail Finance Ltd, where he wrote the business case for PRF Direct, and 6 years at Flexigroup Ltd.

In peer-to-peer lending, the intermediary lending service brings borrowers & lenders together for a fee. Financial Markets Authority compliance director Elaine Campbell said peer-to-peer lending, popular in Europe & the US, would bring new opportunities for lenders & borrowers.

“The service has great potential, but lenders should also realise the risks are greater than putting money in a bank. Lenders can lose money or not get the interest they expect if borrowers fail to repay the loans.

“To meet the required standards, service providers must provide clear disclosure for lenders and have fair, orderly & transparent processes around how they deliver their service. Applicants must also demonstrate they’ll meet minimum standards of conduct.”

Under the regulations, borrowers are limited to raising no more than $2 million in any 12-month period through peer-to-peer lending services. This limit applies to both business & consumer borrowers.  The regulations don’t impose any limits on the amount lenders can lend.

The Financial Markets Authority won’t check individual borrowers using the service, but the Financial Markets Conduct Act 2013 prohibits them from making false or misleading statements, or unsubstantiated claims.

Links: HarMoney
FMA pages, Tips for lenders & borrowers – a guide to peer-to-peer lending 
How to apply for a peer-to-peer licence

Attribution: FMA release.

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New common ownership for Guardian Trust & Perpetual Trust

The NZ Guardian Trust Co Ltd and Perpetual Trust Ltd have both become owned by related New Zealand companies Complectus Ltd & Bath Street Capital Ltd.

Australian financial services company Perpetual Ltd sold Guardian Trust to Complectus on Monday for $68.5 million, and the price Andrew Barnes’ Bath Street is paying for Perpetual Trust rose by $22 million on Monday, on top of the originally agreed $12.34 million, because of Perpetual Trust’s “likely participation in future industry consolidation”.

Newly incorporated Constructus is owned by Mr Barnes’ Bath Street and a wholesale fund run by Milford Asset Management Ltd.

Australian financial services company Perpetual Ltd chewed up The Trust Co Ltd a week before Christmas, then spat out a New Zealand component of it yesterday.

Perpetual Ltd – not related to Perpetual Trust Ltd of New Zealand – bought The Trust Co Ltd in December for $A295 million – $A77.7 million to buy out some shareholders in cash, plus 4.5 million Perpetual shares for the balance. Those shares were trading at $A39 million when the bidding began about 6 months before the 18 December implementation of a scheme of arrangement, and $A48 when the deal was finalised. One component was Guardian Trust.

There is no relationship between Perpetual Ltd in Australia and Perpetual Trust Ltd in New

Zealand, which has just been sold by Pyne Gould Corp Ltd to interests associated with wealth management investor Andrew Barnes.

Complectus’ chairman is Rob Flannagan, who resigned as Tower Ltd’s group managing director in March 2013. Mr Barnes is Complectus’ managing director.

Attribution: Company release.

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Propbd on Q T8Apr14 – Westgate mall starts, Brookfields splits, Barnes brings GT & Perpetual together

DNZ starts Westgate construction
Brookfields confirms split
New common ownership for Guardian Trust & Perpetual Trust

DNZ starts Westgate construction

DNZ Property Fund Ltd has started construction of its $155 million Westgate shopping centre.

The mall will have about 90 specialty stores, a Farmers department store and a Countdown supermarket, and is scheduled to open in October 2015.

Chief executive Peter Alexander said today DNZ had exceeded its pre-leasing target of over 40%, including the 2 majors.

Mr Alexander said the value on completion was estimated at $160 million, which represented a yield on cost of about 7.75%, assuming the centre opens fully leased.

Brookfields confirms split

Auckland cbd law firm Brookfields has reached agreement with its Manukau-based partners that the Manukau office will separate from the firm mid-year.

The Manukau office will practise under the name Denham Bramwell from the existing offices at 3 Osterley Way, Manukau, and Brookfields will continue to practice from its new premises at 205 Queen St.

New common ownership for Guardian Trust & Perpetual Trust

The NZ Guardian Trust Co Ltd and Perpetual Trust Ltd have both become owned by related New Zealand companies Complectus Ltd & Bath Street Capital Ltd.

Australian financial services company Perpetual Ltd sold Guardian Trust to Complectus yesterday for $68.5 million, and the price Andrew Barnes’ Bath Street is paying for Perpetual Trust rose by $22 million yesterday, on top of the originally agreed $12.34 million, because of Perpetual Trust’s “likely participation in future industry consolidation”.

Newly incorporated Constructus is owned by Mr Barnes’ Bath Street and a wholesale fund run by Milford Asset Management Ltd.

Attribution: Company releases.

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ANZ sells mortgage wholesaler Origin to Australia-Malaysia joint venture

Published 24 September 2012

ANZ Banking Group Ltd has agreed to sell its wholesale mortgage distribution business, Origin Mortgage Management Services Ltd, to Columbus Capital Pty Ltd.

Origin provides funding for $A2.2 billion of residential mortgages through a network of mortgage managers who originate & manage the mortgages under their own brands.

Columbus is a non-bank financial institution joint venture established in 2006 by its Australian directors and the MAA Group Bhd of Malaysia, which holds 46%. 2 MAA Group subsidiaries will issue $A1.25 million of preference shares to part-fund the purchase. The full price hasn’t been disclosed.

ANZ said on Friday it would provide transitional services to Columbus for up to 12 months following completion of the sale, due within weeks, and it expected minimal effect on existing borrowers funded by Origin.

MAA Group is the holding company of Malaysian Assurance Alliance Bhd (MAA Assurance) and is controlled by the Melewar Group, which in turn is controlled by Khyra Legacy Bhd.

 

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Attribution: Company release & websites, story written by Bob Dey for the Bob Dey Property Report.

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F&P finance arm ends reliance on guarantee scheme 6 months early

Published 28 June 2011

Fisher & Paykel Appliances Holdings Ltd said yesterday its finance subsidiary would cease offering guaranteed term securities under the Government’s retail deposit guarantee scheme, effective immediately. The guarantee will continue to apply to existing guaranteed debentures. Fisher & Paykel Finance Ltd managing director Alastair Macfarlane said: “The Crown’s guarantee served its purpose through the global financial crisis and it is now appropriate for Fisher & Paykel Finance to only offer non-guaranteed term debentures to the public. “Our consistent strong financial performance and positive liquidity position has given us the confidence to make this change ahead of the expiry of the Crown’s guarantee scheme on 31 December 2011.” Fisher & Paykel Finance increased ebit by 20% to $34.7 million in the March 2011 year and had positive liquidity of $205 million, representing 146% of the outstanding balance of the retail debenture portfolio.

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Attribution: Company statement, story written by Bob Dey for the Bob Dey Property Report.

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SFO launches investigation into Bublitz’s Mutual Finance

Published 30 December 2010

The Serious Fraud Office said in a Christmas website update it had begun an investigation of Mutual Finance Ltd, headed by Paul Bublitz.

SFO director Adam Feeley said in the update he’d determined “there was reason to suspect that an investigation into the affairs of Mutual & related companies may disclose serious or complex fraud”.

Mutual Finance (directors Mr Bublitz, Herne Bay; Paul Hocking Martinborough; & Lance Morrison, Palmerston North) had 400 depositors & $8.2 million in deposits when receivers were called in on 14 July. It was covered by the Crown retail deposit guarantee scheme and depositors had been paid out.

But, in April, Treasury withdrew the guarantee from related company Viaduct Capital Ltd, which had 110 investors & $7.8 million of deposits (including capitalised interest; $515,455 was invested after the guarantee was withdrawn). Boris van Delden & Iain McLennan (McDonald Vague & Partners Ltd) were appointed receivers of Viaduct Capital on 13 May. They projected a 29% recovery of loans ($2.4 million of $8.2 million) and a 28-33% payout to secured depositors.

The Viaduct receivers said in their first report, in August, the Mutual receivership could have an impact on recoveries at Viaduct because of security sharing deeds – under which Mutual came in and pushed Viaduct loans’ priority down. The Viaduct receivers said they’d sought legal advice on the deeds and the resulting priority changes.

Mr Bublitz wasn’t a director of Viaduct Capital but had numerous other relationships with the start-up finance company, which wanted to raise $50 million from the public in term deposits & $5 million in capital notes. Viaduct signed a management services agreement with Mr Bublitz & one of his companies, Hunter Capital Group Ltd, in August 2009. Before & after that agreement was signed there were related-party transactions between Viaduct and Mr Bublitz & his interests which raised a string of questions from Treasury. In each case the company argued transactions were at arm’s length. Another of Mr Bublitz’s companies, Argus Capital Ltd, is an 80% shareholder of Mutual.

Mr Feeley said his decision to launch an investigation on 23 December was based on information from Mutual receivers Grant Graham & Brendon Gibson (KordaMentha Ltd) and the Ministry of Economic Development’s national enforcement unit.

In a further example of cross-regulator co-operation which has become evident in recent prosecutions, Mr Feeley said the SFO was working closely with the enforcement unit & Securities Commission.

Mr Bublitz & 2 partners built up a large property portfolio in the 1990s and entered into a joint venture with NZI Life to own & develop commercial properties. In 1999 he founded Strategic Finance Ltd, left it when Allco of Sydney bought in in 2006 and re-entered the finance company market early in 2009 to support the development of Viaduct Capital.

Mr Hocking is the independent director & chairman of the audit committee of Trustees Executors Ltd. Mr Morrison was a principal of Palmerston North accountancy firm Morrison Creed Ltd, but recently retired. Lindsay Kincaid, a director of the Mutual group of companies, was executive director until he resigned on 21 April.

Earlier story:

15 July 2010: Treasury withdrew guarantee from Viaduct Capital, gets caught by second Bublitz company

22 April 2009: Treasury withdraws guarantee from Wevers’ new company Viaduct Capital

6 March 2009: Wevers launches Viaduct Capital with $50 million prospectus

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Attribution: SFO update, story written by Bob Dey for the Bob Dey Property Report.

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Treasury withdrew guarantee from Viaduct Capital, gets caught by second Bublitz company

Published 15 July 2010

Treasury withdrew the Crown retail deposit guarantee from Viaduct Capital Ltd last April, but got caught on Wednesday by the receivership of another finance company involving Paul Bublitz, Mutual Finance Ltd. In the second case, the guarantee will apply.

 

Mutual’s trustee, Covenant Trustee Co Ltd, called Grant Graham & Brendon Gibson (KordaMentha Ltd) in as receivers of the small finance company, which sought $20 million from investors in April. According to its November 2009 accounts, it had $1.35 million of equity and just $5 million of debenture stock.

 

Treasury financial operations director of Brian McCulloch said Mutual had 400 depositors & $8 million in guaranteed deposits, and all eligible depositors would get back the money they were entitled to under the Government guarantee scheme.

 

Mr Bublitz wasn’t a director of Viaduct Capital but had numerous other relationships with the start-up finance company, which wanted to raise $50 million from the public in term deposits & $5 million in capital notes. Treasury said in May that Viaduct has 110 investors & $7.8 million of deposits. It didn’t say how much of that went in after the guarantee was withdrawn.

 

Viaduct signed a management services agreement with Mr Bublitz & one of his companies, Hunter Capital Group Ltd, in August 2009. Before & after that agreement was signed there were related-party transactions between Viaduct and Mr Bublitz & his interests which raised a string of questions from Treasury. On 26 March, Viaduct Capital bought 2 parcels, each of 1.5 million shares, in Dockland Holdings Ltd (directors Brian Fitzgerald & Marc Lindale) from Hunter Capital Group.

 

At Viaduct Capital, Treasury closely questioned the company about Mr Bublitz’s roles and transactions involving him, but in each case the company argued transactions were at arm’s length.

 

At Mutual Finance, Mr Bublitz is a director and another of his companies, Argus Capital Ltd, is 80% shareholder.

 

The company amended its 3 March prospectus on 28 April to say it was issuing $20 million of secured first-ranking debenture stock and also amending ownership details, which indicated Mr Bublitz would move to full ownership by the end of October. Previous owner Mutual Group Ltd sold 60% of Mutual Finance to Argus Capital Ltd in December, another 20% in March, with the remaining 20% to be transferred in October.

 

Mr Bublitz & 2 partners built up a large property portfolio in the 1990s and entered into a joint venture with NZI Life to own & develop commercial properties. In 1999 he founded Strategic Finance Ltd, left it when Allco of Sydney bought in in 2006 and re-entered the finance company market early last year to support the development of Viaduct Capital Ltd.

 

Apart from Mr Bublitz, of Herne Bay, Mutual Finance’s directors are Paul Hocking, Martinborough; & Lance Morrison, Palmerston North. Mr Hocking is the independent director & chairman of the audit committee of Trustees Executors Ltd. Mr Morrison was a principal of Palmerston North accountancy firm Morrison Creed Ltd, but recently retired. Lindsay Kincaid, a director of the Mutual group of companies, was executive director until he resigned on 21 April.

 

Earlier stories:

22 April 2009: Treasury withdraws guarantee from Wevers’ new company Viaduct Capital

6 March 2009: Wevers launches Viaduct Capital with $50 million prospectus

 

Want to comment? Go to the forum.

 

Attribution: Treasury release, company checks, story written by Bob Dey for the Bob Dey Property Report.

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Knight points at deception of financiers’ default loan accounting

Published 9 May 2008

Property lawyer Kerry Knight found a bright side to a gloomy market outlook in his firm’s May issue, after highlighting how financiers report their performances.

 

“Amazingly, finance companies continue to report profits which are based on penalty interest payments and roll-over fees that can never be paid, but are recurring as a result of non-performing loans. Although this is acceptable accounting under recently adopted practices, it is deceptive from an investor’s point of view, as the finance companies that investors are investing in appear to be performing well.

 

“In actual fact, finance companies rarely disclose that they are unlikely to get interest (let alone penalty interest), fees & all the capital back, which would show their profit in a very different light.”

 

Mr Knight, a partner at Princes Wharf law firm Knight Coldicutt, said the market came to an abrupt halt at the start of last year: “Other than Blue Chip products, apartments, second homes & holiday homes ceased selling in substantial numbers. Banks, finance companies & developers went silent, hoping the market would rectify itself. Quite clearly things have worsened and the snowball effect is causing panic.”

 

Mr Knight said banks & finance companies were sitting on large loan books in default because developers, “who, as we know, don’t have surplus cash,” had stopped buying land because they were unable to secure finance.

 

Their financiers had not crystallised their losses yet because they were hoping the market would turn: “But things are probably going to worsen. Banks will start closing in and selling underperforming property portfolios.

 

“If you are in the market for acquiring large development sites, land with consents or stalled projects, then you could do well. But you will have to wait for 2 years or so (before developing), which requires large equity.”

 

Want to comment? Email bobdey@propbd.co.nz.

 

Attribution: Newsletter, story written by Bob Dey for this website.

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