Archive | Strategic Finance

2c payout coming for Strategic investors

Strategic Finance Ltd’s receivers said in a letter to investors yesterday they have received the full $22 million they sought from the group’s directors & auditors.

The receivers expect to make a distribution of 2c:$1 around Wednesday 17 December, taking the total distribution to secured debentureholders to 16c. A further distribution in the first half of 2015 will be subject to 2 property loan settlements being concluded.

The settlement agreement, reached in June, went unconditional in August, when the first $10 million was paid, and 2 payments of $6 million followed.

The receivers, PwC partners John Fisk & Colin McCloy, said they still expected recoveries to remain in the 17-21% range of the principal outstanding to secured debentureholders at the date of receivership, March 2010.

When the settlement was first announced, the directors also gave the Financial Markets Authority an enforceable undertaking that they wouldn’t, without the authority’s prior written approval, act as a director or promoter of a public issuer of securities for 5 years, or accept appointment or employment or act as a chief executive or chief financial officer (or equivalent position) of a public issuer of securities for 3 years.

The directors who were the subject of the authority’s claim and who provided undertakings are chief executive Kerry Finnigan, Graham Jackson, Marc Lindale, Timothy Rich, chairman Denis Thom & David Wolfenden.

Strategic placed a trading halt on all its securities on 7 August 2008, and trading in them didn’t resume. In December 2008 the company entered a 5-year moratorium and in March 2010 the company’s trustee, Perpetual Trust Ltd, appointed the receivers. Liquidators were appointed in July 2010.

When the receivers were appointed, Strategic owed 10,000 investors in secured debentures $367.8 million on 12,900 investments. At 31 October 2008, Strategic had a loan portfolio with a net book value after provisions of $478 million, spread over 100 loans. On 1 March 2010, total assets were halved from a year earlier – from $463 million to $234 million – but total liabilities rose by 3% to $435 million, taking shareholders’ funds from a positive $41 million to a negative $201 million.

Previous stories:

12 August 2014: Strategic Finance receivers collect first settlement $10 million
6 June 2014: Strategic Finance directors & auditors settle for $22 million

Attribution: Receivers’ letter.

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Strategic Finance receivers collect first settlement $10 million

The receivers of Strategic Finance Ltd have received the first $10 million of the $22 million settlement they agreed with the company’s former directors and auditors BDO Spicers, and expect to make a payment to secured investors within a fortnight.

The other 2 instalments, each of $6 million, are to be paid at the end of this month and in November.

The receivers, PwC partners John Fisk & Colin McCloy, and the Financial Markets Authority announced they had finalised the settlement agreement in June. It became unconditional last Friday.

When the settlement was first announced, the directors also gave the Financial Markets Authority an enforceable undertaking that they wouldn’t, without the authority’s prior written approval, act as a director or promoter of a public issuer of securities for 5 years, or accept appointment or employment or act as a chief executive or chief financial officer (or equivalent position) of a public issuer of securities for 3 years.

The directors who were the subject of the authority’s claim and who provided undertakings are chief executive Kerry Finnigan, Graham Jackson, Marc Lindale, Timothy Rich, chairman Denis Thom & David Wolfenden.

Strategic placed a trading halt on all its securities on 7 August 2008, and trading in them didn’t resume. In December 2008 the company entered a 5-year moratorium and in March 2010 the company’s trustee, Perpetual Trust Ltd, appointed the receivers. Liquidators were appointed in July 2010.

When the receivers were appointed, Strategic owed 10,000 investors in secured debentures $367.8 million on 12,900 investments. By July 2013, the receivers had paid investors $36.8 million – 10c:$1 – in 5 payments.

At 31 October 2008, Strategic had a loan portfolio with a net book value after provisions of $478 million, spread over 100 loans. On 1 March 2010, total assets were halved from a year earlier – from $463 million to $234 million – but total liabilities rose by 3% to $435 million, taking shareholders’ funds from a positive $41 million to a negative $201 million.

Previous story, 6 June 2014: Strategic Finance directors & auditors settle for $22 million

Attribution: PWC & FMA release.

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Propbd on Q T12Aug14 – Apartment design winner named, East Tamaki unit sells, Strategic payout, Summerset result mixed

S 3 Architects wins brownfields apartment design competition
Small East Tamaki unit sells
Strategic Finance receivers to make first payout within fortnight
Summerset profit up, underlying return down, dividend at low end

5.17pm:
S 3 Architects wins brownfields apartment design competition

S 3 Architects Ltd (Stephen Smith; design at right) has won the Institute of Architects’ competition to design an apartment building for a brownfield Mt Eden site, which attracted 67 entries.

The competition was launched by Ockham Residential Ltd director Mark Todd after discussions with architects about affordable construction 2 years ago.

The other finalists were Leuschke Group Architects Ltd, Matthews & Matthews Architects Ltd, Waterfall Gunns Lowe Architects Ltd and Andrew Sexton Architecture Ltd.

1.18pm:
Small East Tamaki unit sells

A small East Tamaki warehouse & office unit was sold at $3000/m² at Colliers International’s auction today. A 1970s New Lynn warehouse & showroom was passed in. Auction results:

East Tamaki, 14 Basalt Place, unit 13, sold for $1.95 million at $3000/m², sales agent Jolyon Thomson
New Lynn, 12 Bentinck St, passed in at $800,000, Chris Upright

Strategic Finance receivers to make first payout within fortnight

Strategic Finance Ltd’s receivers, John Fisk & Colin McCloy of PWC, have received the first settlement payment from the company’s former directors & auditors – $10 million of the total $22 million – and will make a distribution to secured investors in the next 2 weeks.

The other 2 instalments, each of $6 million, are to be paid at the end of this month and in November.

Summerset profit up, underlying return down, dividend at low end

Summerset Group Holdings Ltd said today its net profit after tax for the June half rose 42% to $15.3 million, but its underlying profit fell 6%, from $10 million to $9.4 million. Total assets rose 21% to $921 million.

Sales of occupation rights rose 3% to 195, and the company delivered 136 new retirement units, up 33%.

Summerset’s dividend policy is to pay out 30-50% of underlying profit. The 1.4c/share interim dividend equates to 32%.

Attribution: Auction, PWC & Summerset releases.

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Strategic Finance directors & auditors settle for $22 million

The Financial Markets Authority and the receivers of Strategic Finance Ltd have finalised a settlement with the company’s directors & auditors.

Under the terms of the settlement, the directors & auditors will pay the receivers $22 million. This will enable the receivers, PWC partners John Fisk & Colin McCloy, to make a further distribution to investors.

In addition, the directors have given the authority an enforceable undertaking that they won’t, without the prior written approval of the authority, act as a director or promoter of a public issuer of securities for 5 years, or accept appointment or employment or act as a chief executive or chief financial officer (or equivalent position) of a public issuer of securities for 3 years.

The directors who were the subject of the authority’s claim and who have provided undertakings are chief executive Kerry Finnigan, Graham Jackson, Marc Lindale, Timothy Rich, chairman Denis Thom & David Wolfenden.

Strategic placed a trading halt on all its securities on 7 August 2008, and trading in them didn’t resume. In December 2008 the company entered a 5-year moratorium and in March 2010 the company’s trustee, Perpetual Trust Ltd, appointed the receivers. Liquidators were appointed in July 2010.

When the receivers were appointed, Strategic owed 10,000 investors in secured debentures $367.8 million on 12,900 investments. By last July, the receivers had paid investors $36.8 million – 10c:$1 – in 5 payments.

At 31 October 2008, Strategic had a loan portfolio with a net book value after provisions of $478 million, spread over 100 loans. On 1 March 2010, total assets were halved from a year earlier – from $463 million to $234 million – but total liabilities rose by 3% to $435 million, taking shareholders’ funds from a positive $41 million to a negative $201 million.

The Financial Markets Authority said in February 2013 its investigation had found that the directors were likely to have breached the Securities Act by making untrue statements in a registered prospectus, investment statement and in an advertisement between March-August 2008.

Separately, the receivers pursued claims against the directors, and against auditors BDO Spicers in respect of the 31 December 2007 audit.

Financial Markets Authority enforcement & investigations director Belinda Moffat said yesterday: “In reaching this settlement, we are providing certainty & compensation to investors. We have also been mindful of avoiding a lengthy & costly court case, with potential litigation risk. The terms of the settlement deliver a strong deterrence message and include enforceable undertakings from the directors of Strategic not to act as a director of an issuer of securities to the public for 5 years.

“While the directors do not admit liability, the authority remains of the view that they are likely to have breached their disclosure obligations under the Securities Act. However, given the limited personal assets of the directors, this settlement represents the best outcome for investors in the circumstances.”

The settlement resolves all claims as between the authority, the receivers, liquidators, trustees, directors & auditors. The settlement sum will be paid over the next 6 months to the receivers.

Attribution: FMA release.

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Strategic Finance receivers complete settlement talks with directors

Strategic Finance Ltd’s receivers have completed settlement talks with the directors but have extended the settlement period while negotiations continue with a third party. The Financial Markets Authority is still negotiating with the directors.

Receiver John Fisk said in a report on Friday the estimated range of recoveries to secured debenture investors remained unchanged from the December estimate of 12-20% of the principal amount outstanding at the date of receivership.

The trustee of Strategic Finance Ltd, Perpetual Trust Ltd, appointed Mr Fisk & Colin McCloy (PWC) as receivers in March 2010. Andrew McKay & John Cregten (Corporate Finance Ltd) were appointed liquidators in July 2010.

When the receivers were appointed, Strategic owed 10,000 investors in secured debentures $367.8 million on 12,900 investments. The receivers have paid investors $36.8 million – 10c:$1 – in 5 payments, including 1.5c paid in December.

Mr Fisk said most of Strategic’s property loan book had been realised, but 5 remained more challenging to realise due to their nature as development or coastal properties with title or resource consent issues.

He said the receivers undertook settlement discussions with the directors on a without-prejudice & confidential basis in accordance with a formal process, hoping for a better outcome than going to court: “This process involved a robust & constructive discussion regarding the claims against the directors. These negotiations are now effectively complete, subject to the resolution of certain outstanding matters on an agreed timetable.”

The receivers’ claims relate to alleged breaches of the directors’ obligations under the Companies Act. The Financial Markets Authority has said it intends to pursue civil action against the directors over alleged breaches of the Securities Act and has also been engaged in confidential discussions with the directors.

In the meantime, Mr Fisk said, the receivers had also been investigating a separate claim against a third party, with whom they’d begun without-prejudice discussions. “The deadline for finalising a settlement with the directors has been extended whilst these separate discussions are progressed. We will provide a further update as soon as possible.”

Strategic Finance has realised a net $45 million after payments to prior-ranking securityholders & direct sale costs for the period 12 March 2010-30 June 2013. Mr Fisk said loans & related properties under contract for sale since the receivers’ December report – where there are proceeds available to Strategic – are:

  • one loan where an assignment of Strategic’s debt has been entered into, with consideration to be paid to Strategic on settlement of the assignment
  • a development site in Fiji subject to an unconditional contract and repayment plans have been entered into with certain guarantors, which provides for funds to be paid to Strategic over an agreed period of time, and
  • loans where further work is required to resolve certain issues before marketing the properties for sale.

There are 5 key remaining loans where the underlying properties are not under contract or subject to any arrangement:

  • Property in Northland where the borrower is trying to resolve title issues so the development can be sold
  • Property in Australia where an amendment to the resource consent is being sought
  • Property in Fiji where title issues are being dealt with, and
  • 2 properties where Strategic has a second mortgage and there are substantial amounts owing to the first mortgagee; in both cases, the receivers are working with the borrower to negotiate the best possible outcome for Strategic.

“Progress has been made in dealing with the outstanding property issues in the first half of 2013 and we expect to have either settlement arrangements in place or marketing campaigns for these properties commencing in the second half of 2013.

“In addition, there are 3 loans where legal action is being taken to try to recover funds for Strategic. The legal action primarily relates to disputes as to who is entitled to certain funds. These legal proceedings were all heard this year and the current status is:

  • Strategic succeeded in a summary judgment action over entitlement to certain funds, but an appeal is likely
  • Strategic obtained summary judgment over a debt owed by a third party under a guarantee, but payment hasn’t been received and the receivers have initiated bankruptcy proceedings against the third party
  • The third matter was heard in the Court of Appeal in early 2013 and a decision is awaited.

Where the only remaining security for loans was guarantees, Mr Fisk said the receivers were seeking to maximise the value of any collateral securities Strategic held, including personal guarantees: “We have now dealt with the majority of the guarantors of loans, either by way of settlement arrangements (which provides for funds to be repaid to Strategic over an agreed period of time) or making demand and issuing legal proceedings to recover funds.”

Mr Fisk said the receivers were working towards quick resolution of claims against 2 guarantors they haven’t reach agreement with or take enforcement action on.

Attribution: Receivers’ release.
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Trustee appoints liquidators as well as receivers to Strategic Finance

Published 28 July 2010

The trustee of Strategic Finance Ltd has followed its March appointment of receivers by appointing liquidators this week.

 

The trustee, Perpetual Trust Ltd, appointed John Fisk & Colin McCloy (PWC) as receivers on 12 March and appointed Andrew McKay & John Cregten (Corporate Finance Ltd) as liquidators on Monday.

 

Perpetual’s head of corporate trust, Matthew Lancaster, said yesterday: “Normally a receivership would be enough because a receiver would recover sufficient to repay the investors. Liquidators have considerable powers and can look into transactions 2 years prior to liquidation commencing, and can investigate transactions. Receivers can’t void transactions.”

 

Mr Lancaster said it was too early to say if specific transactions should be investigated.

 

The liquidation application was filed on 17 June, so the liquidators can investigate transactions back to June 2008, which takes in the last 6 months of business before Strategic entered a moratorium.

 

The liquidation won’t interfere with the work the receivers have under way to sell Strategic’s loan portfolio. Receiver John Fisk said: “We are actually still going through the due diligence process.

 

The receivers had hoped to complete that process by the end of this month, but Mr Fisk said it was now likely to run to mid-August “before we are in a position to announce anything”.

 

There is complex due diligence being done on securities documentation: “They’re genuine offers, but at this stage not firm.”

 

Earlier stories:

10 May 2010: Strategic Finance receivers to seek offers for loan book

14 March 2010: Moratorium sceptic Fisk appointed Strategic receiver

31 March 2010: No money left, so Strategic prefs to delist

22 December 2008: Strategic Finance votes overwhelmingly favour moratorium

 

Want to comment? Go to the forum.

 

Attribution: Phone interviews, story written by Bob Dey for the Bob Dey Property Report.

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Commission warns about third unsolicited offer to Strategic investors

Published 13 June 2010

The Securities Commission warned Strategic Finance Ltd debentureholders on Friday to be wary of the third unsolicited offer for their stock.

Stock & Share Trading Co, from Australia, first offered debentureholders 20c:$1, then lowered its offer to 5c:$1. The commission warned investors about an unsolicited offer in January from Marchmont Securities Trust.

 

The commission said it wasn’t illegal to offer to buy securities below their face value, but any such offer mustn’t be misleading or deceptive: “When a finance company is in receivership it is very difficult to accurately assess the value of the company’s debentures. The debentures are not trading on any organised market, so there is no market price against which investors can assess the offer.”

Want to comment? Go to the forum.

 

Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.

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Strategic Finance receivers to seek offers for loan book

Published 10 May 2010

Strategic Finance Ltd’s receivers want indicative offers for the company’s $229.1 million loan book by mid-June.

 

Perpetual Trust Ltd appointed PricwaterhouseCoopers partners John Fisk & Colin McCloy as receivers of Strategic Finance Ltd & 4 subsidiaries on 12 March, cutting short a 5-year moratorium which began in December 2008.

 

The receivers said in a letter to investors last week: “We have received several expressions of interest regarding the purchase of Strategic Finance’s loan book, either in whole or in part. We have also contacted the wider PWC network in Australia & Asia to identify other potential interested parties.

 

“We will be running a formal sales process, with indicative offers for the loan book due by mid-June. This will enable the receivers to assess the level of interest in the loan book and any indicative offers against the expected realisations in the receivership.

 

“Any potential recovery range will not be announced until after the sales process has been completed.”

 

At 31 October 2008, Strategic had a loan portfolio with a net book value after provisions of $478 million, spread over 100 loans. On 1 March this year, total assets were halved from a year earlier – from $463 million to $234 million – but total liabilities rose by 3% to $435 million, taking shareholders’ funds from a positive $41 million to a negative $201 million.

 

The receivers said that at 26 February, total assets stood at $240.5 million, a net deficit of $211.4 million against total liabilities of $451.9 million. The net property loan book was $229.1 million on 87 loans. Liabilities include secured debenture stock at $367.8 million (representing 12,900 investments by 10,000 investors), notes of $21.8 million, interest payable at $54.7 million.

 

Most of the loans are on development land with prior-ranking charges and further funding required to complete development.

 

About 25 of the remaining 87 loans are to borrowers in liquidation or receivership, or the prior-ranked mortgagee has exercised its power of sale, is in the process of doing so or will do so.

 

The receivers expect to issue their next report by the end of July, when they hope the outcome of the sales process and nature & timing of distributions will have become clearer.

 

Earlier stories:

14 March 2010: Moratorium sceptic Fisk appointed Strategic receiver

3 March 2010: Strategic Finance loss worse than signalled

26 February 2010: Soho Square owes $94 million as receivers take it to market

18 January 2010: Strategic book value now less than 75% of debt to investors

6 January 2010: Strategic Finance repays BOS, can’t pay investors

2 September 2009: Further provisions cut Strategic moratorium payment prospects

22 December 2008: Strategic Finance votes overwhelmingly favour moratorium

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No money left, so Strategic prefs to delist

Published 31 March 2010

Strategic Finance Ltd’s receivers have asked the NZX to cancel quotation of the company’s preference shares and to delist it because there’s no money available for them.

 

Perpetual Trust Ltd appointed John Fisk & Colin McCloy (PWC) on 12 March as receivers of Strategic & subsidiaries.

“Having regard to the extent of Strategic’s creditors, and the receivers’ assessment to date of likely recoveries, the receivers anticipate there will be a shortfall in the amount available for creditors and no amount available for Strategic’s preference shareholders,” they said.

 

Earlier stories:

14 March 2010: Moratorium sceptic Fisk appointed Strategic receiver

3 March 2010: Strategic Finance loss worse than signalled

26 February 2010: Soho Square owes $94 million as receivers take it to market

18 January 2010: Strategic book value now less than 75% of debt to investors

6 January 2010: Strategic Finance repays BOS, can’t pay investors

2 September 2009: Further provisions cut Strategic moratorium payment prospects

22 December 2008: Strategic Finance votes overwhelmingly favour moratorium

 

Want to comment? Go to the forum.

 

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

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Moratorium sceptic Fisk appointed Strategic receiver

Published 14 March 2010

Perpetual Trust Ltd appointed receivers to Strategic Finance Ltd on Friday, cutting short a 5-year moratorium which began in December 2008 but hadn’t produced the anticipated returns.

 

The trustee appointed John Fisk & Colin McCloy (PricewaterhouseCoopers) as receivers, saying it had given Strategic’s board time to develop & submit offers received after moratorium conditions were breached. Mr Fisk was the PWC partner who compiled the 2008 independent report on the moratorium, which presented a more sceptical view of likely returns than the board’s projections.

 

The board, in response, said it was disappointed in this outcome after negotiating with the trustee in good faith following the trust deed review events. While the trustee said it had allowed time for Strategic to submit offers, the Strategic board said it had delivered 6 viable options which would have provided a better outcome than receivership.

 

Major stakeholder BOSIAL (BOS International (Australia) Ltd) supported the moratorium 15 months ago and Strategic said the financier continued to be a strong supporter.

 

“The board considers receivership to be very destructive to value and detrimental to the repayment of monies to investors. 2 of the proposals were well advanced and would have provided for an immediate cash payment, ongoing income & the potential for maximum recovery for investors. “The board are surprised that, although there was strong support from Bank of Scotland (as the single largest debentureholder) for both transactions, the trustee has chosen not to allow investors to consider & vote on the proposals.” At 31 October 2008, Strategic had total assets of $517 million, including a loan portfolio with a net book value after provisions of $478 million. The portfolio had about 100 loans but was highly concentrated: the top 10 loans by borrower group accounted for 67% of the total portfolio.

 

60% of the portfolio was in default as the loans had passed their due date for repayment and had yet to be repaid. A further 7% would have been in default had their maturity dates not been extended. 58.5% of the total dollar value of outstanding loans was secured by second-ranking mortgages.

 

Strategic had 12,800 stockholders at that time, holding $410 million (including $120 million of the nominal amount of security stock held by BOS as security for an aggregate principal amount of about $100 million).

The expectation under the moratorium was that investors would eventually get back 100% of their principal, plus interest. But the value of the loan book kept declining: By December it was down to $220 million, and by January it was worth less than 75% of Strategic Finance’s liabilities.

 

On 1 March, Strategic said it made a $100 million after-tax trading loss for the December half – $16 million worse than it signalled in January. Total assets were halved from a year earlier – from $463 million to $234 million – but total liabilities rose by 3% to $435 million, taking shareholders’ funds from a positive $41 million to a negative $201 million.

 

Strategic chairman Denis Thom told investors in the January newsletter the company had fully repaid BOSIAL’s $25 million priority debt facility – which he said was positive because it meant all future income beyond the needs of working capital could be repaid directly to investors. But, immediately, it meant Strategic couldn’t make its scheduled 7 January payment to investors, sparking the first of the review events under the trust deed.

 

One of Strategic’s big outstanding loans was $70 million in second-mortgage funds to Layne Kells’ Soho Square project in Ponsonby – a 1.3ha hole which was taken to tender by CBRE at the end of February. The Strategic debt stood behind $23 million owed to Fortress Credit Corp (Australia) II Pty Ltd, and the debt to Fortress was about the sum Mr Kells’ Marlin Group paid for the former DYC vinegar factory site in 2004.

Perpetual said: “Following the announcement of those 2 review events in January, a number of offers from third parties for restructuring &/or sale of its assets were received by Strategic. Perpetual Trust provided the board & management team of Strategic Finance a reasonable amount of time to develop these offers and for it to submit them to Perpetual.

“Perpetual Trust, as trustee for investors, is now satisfied, having completed a thorough review, that receivership is a better option for investors than proceeding with any of the proposals.

“Perpetual Trust believes that receivership is the best option because the receivers will be focused on achieving the best outcome for investors, and in particular that it is expected ultimately to provide better returns for investors.

“While the processes required following the review events and in assessing the options have taken longer than Perpetual Trust would have wished, Perpetual believed it was important to establish whether any of the restructuring or sale proposals would have provided better returns or more certainty for investors.

“Perpetual Trust will be writing to investors next week and the receivers will be in contact with investors in the next few weeks with contact details, their expectation of the timetable for their work programme and when they will be able to advise their expectation of how much of investors’ monies will be realised.”

 

Earlier stories:

3 March 2010:

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