Archive | Cynotech

Commission files criminal charges against 2 Allan Hawkins finance companies

The Commerce Commission has filed criminal proceedings in the Auckland District Court against 2 finance companies controlled by former Equiticorp boss Allan Hawkins, Budget Loans Ltd & Evolution Finance Ltd, alleging their repossession & debt recovery practices breached the Fair Trading Act.

The commission has charged the 2 companies with misleading debtors, including by:

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

Commerce Commission competition general counsel Mary-Anne Borrowdale said today it was concerning that Budget Loans was again facing criminal charges, having admitted 34 charges under the Fair Trading Act in 2010.

Allan Hawkins & his son Wayne Hawkins are the directors of Budget Loans & Evolution Finance, which bought old loan books from a number of failed finance companies, including National Finance Ltd, Western Bay Finance Ltd & Equality Finance Ltd. Most of the loans originated between 2001-06.

In July 2010, Budget Loans 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 in the Auckland District Court.

The Commerce Commission started the current investigation into Budget Loans & Evolution Finance in 2012. It issued a “Stop now” letter to the 2 companies in November 2013 with regard to one aspect of their conduct while its investigation continued. The charges filed include the conduct outlined in the “Stop now” letter, as well as further conduct the commission investigated.

Mr Hawkins headed the listed Equiticorp Group, which was placed in the new insolvency control of 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.

He controls Budget Loans & Evolution Finance through formerly NZX-listed Cynotech Holdings Ltd and the private company which bought out other Cynotech Holdings investors, Cynotech Securities Ltd.

Cynotech Holdings took over the NZX-listed Rocom Wireless Ltd in 2004 and sold out of all information & domestic telecommunications-related interests to focus on satellite communication and satellite phone sales & rentals, finance lending and merchant banking fee-based activities.

Trading in Cynotech Holdings securities was halted in July 2013 after the company told the NZX its major shareholder & other close funding supporters had decided they would no longer pay its overhead & infrastructure costs. Liquidators Peri Finnigan & Tony Maginness were appointed at the end of that month, but were replaced I November 2013 by Derek Farrelly, now of Rotorua.

Earlier stories:
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
31 July 2013: Hawkins goes to McDonald Vague for Cynotech liquidation
11 July 2013: Cynotech share trading halted after backers end support
15 June 2011: Cynotech loss increases as it clears decks
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
20 January 2010: Hawkins renews Cynotech privatisation bid
9 July 2008: Hawkins says conservative policy wins for Cynotech
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months

Attribution: Commission release.

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Commission tells Allan Hawkins’ finance companies to stop repossessions

The Commerce Commission said on Wednesday it had issued a ‘stop now’ letter to 2 finance companies controlled by former Equiticorp chairman Allan Hawkins, Evolution Finance Ltd & Budget Loans Ltd, asking them to stop repossessing, or asserting a right to repossess, consumer goods where the applicable loan contract didn’t give them a right to do so.

The commission said it had evidence that showed Evolution Finance & Budget Loans were likely to have breached sections 9 & 13(i) of the Fair Trading Act by claiming they had a right under certain loan contracts to repossess consumer goods not agreed as security in the original loan contract.

The decision to send the companies a ‘stop now’ letter came part way through the commission’s investigation into the 2 companies and was designed to prevent further harm to consumers while that investigation continued.

The 2 companies are subsidiaries of Mr Hawkins’ Cynotech Holdings Ltd, which went into liquidation on Mr Hawkins’ court application on 26 July and was delisted from the NZX on 13 September. The 2 liquidators, Peri Finnigan & Tony Maginness (McDonald Vague), were replaced on 31 October by Derek Farrelly, an insolvency practitioner once based in Devonport, now of Rotorua.

Trading in Cynotech Holdings securities was halted on 10 July after the company told the NZX its major shareholder & other close funding supporters had decided they would no longer pay its overhead & infrastructure costs.

Cynotech chairman Mr Hawkins – founder of 1980s high-flier the Equiticorp group and jailed for fraud in 1992, after its demise in the 1987 sharemarket collapse – bought into the lossmaking NZX-listed Rocom Wireless Ltd in 2004 and turned it into a consumer finance company, Cynotech. Troubled by the impact of the global financial crisis, Mr Hawkins sought to privatise Cynotech at the end of 2009 through his family company, Cynotech Securities Group Ltd.

Mr Hawkins warned when trading in Cynotech shares was halted that liquidation would follow. The assets of its subsidiary companies, which he said would continue trading, would be available for sale. The assets comprised mainly the distressed loan books originally acquired when National Finance Ltd & Western Bay Finance Ltd went into receivership.

The original liquidators said in their 22 August report that $6.56 million owed to unsecured creditors was mostly made up of intercompany advances. Another $2 million was owed to holders of capital securities in unpaid dividends. The book value of assets was given as $14.64 million, of which $10 million was for shares in subsidiaries, but $11.23 million was owed under general security agreements to group companies Budget Loans Ltd, Cynotech Finance Group Ltd & Evolution Finance.

The formerly listed company’s 77.5% owner, private Hawkins company Cynotech Securities Group Ltd, changed its name to Budget Loans Group Ltd on 5 July and appointed Mr Farrelly as liquidator on 6 November.

Budget Loans Group is owned by Cynotech Securities Ltd, a company which harks back to Mr Hawkins’ Equiticorp days. Its previous name was Ararimu Farms & Investments Ltd (one of a few Ararimu companies in the Equiticorp group) and, apart from Hawkins interests, the shareholders include 2 other 80s companies in both liquidation & receivership, Richardson Camway Ltd (209 of the 4 million shares) & Equiticorp Finance Group Ltd (25 shares).

First Pacific Finance Ltd, holder of 443 Budget Loans shares and with Mr Hawkins’ Orakei postbox as its address, was a Vanuatu company originally called Yeoman. It was one of 3 companies registered in different island tax havens which were in what became known as the Yeoman loop, and were used to channel tens of millions of dollars from Elders Merchant Finance Ltd in Australia to Hawkins interests – including the $A39.2 million known as the H fee, a sum whose purpose was never adequately explained in 2 trials.

Attribution: Commission release, Companies Office.

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Hawkins goes to McDonald Vague for Cynotech liquidation

Peri Finnigan & Tony Maginness (McDonald Vague) were appointed liquidators of NZX-listed Cynotech Holdings Ltd last Friday.

Trading in Cynotech Holdings Ltd securities was halted on 10 July after the company told the NZX its major shareholder & other close funding supporters had decided they would no longer pay its overhead & infrastructure costs.

Cynotech chairman Allan Hawkins – founder of 1980s high-flier the Equiticorp group and jailed after its demise in the 1987 sharemarket collapse – bought into the lossmaking NZX-listed Rocom Wireless Ltd in 2004 and turned it into a consumer finance company, Cynotech. Troubled by the impact of the global financial crisis, Mr Hawkins sought to privatise Cynotech at the end of 2009 through his family company, Cynotech Securities Group Ltd.

Mr Hawkins warned 3 weeks ago, when trading in Cynotech shares was halted, that liquidation would follow. The assets of its subsidiary companies, which will continue trading, will be available for sale. The assets comprise mainly the distressed loan books originally acquired when National Finance Ltd & Western Bay Finance Ltd went into receivership.

Attribution: Company release.

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Cynotech share trading halted after backers end support

Trading in Cynotech Holdings Ltd securities was halted last night after the company told the NZX its major shareholder & other close funding supporters had decided they would no longer pay its overhead & infrastructure costs.
 
Cynotech chairman Allan Hawkins – founder of 1980s high-flier the Equiticorp group and jailed after its demise in the 1987 sharemarket collapse – bought into the lossmaking NZX-listed Rocom Wireless Ltd in 2004 and turned it into a consumer finance company, Cynotech. Troubled by the impact of the global financial crisis, Mr Hawkins sought to privatise Cynotech at the end of 2009 through his family company, Cynotech Securities Group Ltd.
 
Cynotech Securities was renamed Budget Loans Group Ltd last Friday and registered its office move from Newmarket to Saleyards Rd, Otahuhu, on Monday. The listed company registered its move from Newmarket to Saleyards Rd on Tuesday.
 
Mr Hawkins’ private company ended up with 77.5% of the listed company after his takeover bid succeeded in 2010, and the remaining securities of the listed company were traded on the NZAX & NZDX. In the next few months, Mr Hawkins talked of taking the company listing away from the NZX to another trading platform, and the NZX briefly suspended trading for late filing of the annual report.
In last night’s statement to the NZX, Mr Hawkins said: “The provision of funding support by the Budget Loans Group parties and the group’s major lenders & depositors has been a significant factor in ensuring the solvency of Cynotech Holdings for the last 2 years.
 
“As a consequence of the advice received from a number of those parties, the directors of Cynotech Holdings today resolved that the company can no longer continue as it will become insolvent without the provision of ongoing funding from its major shareholder & others.
 
“Accordingly a court application is being made by a director for the liquidation of Cynotech Holdings. The assets of the subsidiary companies of Cynotech Holdings, which will continue trading, will be available for sale. The assets comprise mainly the distressed loan books originally acquired when National Finance Ltd & Western Bay Finance Ltd went into receivership.
 
“The directors advise that any trade creditors & taxes of Cynotech Holdings will be paid up to date for the period up to 30 June.”
 
Cynotech Holdings has failed to pay either of the quarterly dividends this year to holders of its Cynotech capital securities 9.25% perpetual preference shares, the second of those no-dividend decisions coming on 24 June.
 
The $1.78 million of debt securities had a price tag of $30 until 7 May, when it dropped to $15 for a face value of $100. Cynotech didn’t pay a dividend on the securities in March and said on 24 June it wouldn’t pay a second-quarter dividend either.
 
The company’s share price dropped from 0.6 of a cent ($0.006) to 0.2 of a cent a week before the 13 June announcement of the company’s annual result, which showed a bigger loss than in 2012, taking the company to negative equity of $3.85 million ($1.34 million at March 2012).
 
Group assets fell from $11.6 million last year to $6.8 million, while liabilities shrank from $12.93 million to $10.66 million.
 
Cynotech increased revenue by only 3% in the March 2013 year, to $2.96 million, and improved the bottom line by 54%, from an aftertax loss of just under $3 million in 2012 to a $1.36 million loss, with no dividend payable in either year.
 
Attribution: Company release.

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Cynotech loss increases as it clears decks

Published 14 June 2011

Cynotech Holdings Ltd increased its net loss by 46%, from $2.74 million to $4 million, in the March year.

Executive chairman Allan Hawkins said yesterday the major negative charge against group earnings was the $1.2 million of impairment provisions made against the intercompany loans & investment in Seating Systems Ltd. Other provisions took the writedown to $1.8 million.

Cynotech has reduced total assets by 21%, from $20.7 million to $16.3 million, but liabilities by only 2%, from $15.1 million to $14.8 million, cutting total equity by 74%, from $5.6 million to $1.5 million. The ratio of equity:total assets has been cut from 40% to 9%.

Mr Hawkins said the financial accounts & the notes to the accounts again disclosed a mismatch between the contractual maturities of deposits & other term loans when compared to the timing of the projected cash inflows from the asssets of the group: “The directors have addressed this mismatch and have concluded that it is a manageable mismatch, given historical factors & relationships. As at 1 July 2011, the group will have no bank debt. In addition, shareholders are aware that the Cynotech Holdings group is in a phase where emphasis is being directed to the reduction of assets and the repayment of debt.”

Mr Hawkins’ private Cynotech Securities Group Ltd bought 78.4% of ordinary shares, 51.4% convertible preference shares and 71.9% warrants of the listed company in a takeover bid early last year.

Mr Hawkins said when he first proposed the takeover offer in 2009, the reasons for it were:

Cynotech Holdings’ directors (chiefly himself) had said publicly they believed the small finance company sector wouldn’t start to improve for at least the next 2 yearsBecause of the adverse public perception of the finance sector at that time it was not probable that the NZX listing would be of any advantage to the group as a funding mechanism in the near futureThe group had come through the machinations in the sector unscathed, but couldn’t see the immediate path to growth in its main business sector, andBecause of the small number of holders, there was no in-depth trading on the NZX in any of the group’s listed securities.

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

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Cynotech securities trading again

Published 31 August 2010

NZX Market Supervision lifted the halt on trading of Cynotech Holdings Ltd securities on Monday after the company provided its annual report.

 

Cynotech was suspended on 10 August after failing to supply NZX with its annual report by 2 August. The company unsuccessfully sought a waiver, arguing “shareholders have had a swathe of material relating to the company & its financial position, since January of this year”, largely because of takeover offers from executive chairman Allan Hawkins’ private interests, which ended up with 71% of the shares.

Earlier stories:

12 August 2010: NZX refuses Cynotech request for waiver

11 August 2010: Cynotech suspended

4 August 2010: Cynotech talks departure, NZX talks suspension

2 August 2010: Cynotech looks at alternatives to NZAX

16 June 2010: Cynotech slips to loss

14 April 2010: Remaining Cynotech shares to move to NZAX

23 March 2010: Hawkins tops 71% in Cynotech privatisation bid

 

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

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NZX refuses Cynotech request for waiver

Published 12 August 2010, extra material on Cynotech’s case published later in the day

NZX Market Supervision said yesterday it had refused Cynotech Holdings Ltd’s request for a waiver from the listing rule on filing its annual report which has resulted in its securities being suspended from trading.

 

Cynotech securities are quoted on the NZAX & NZDX markets, but were suspended from trading on Tuesday. The company asked for a waiver until tomorrow.

 

Cynotech’s case

 

Cynotech – headed by executive chairman Allan Hawkins – submitted that, “in the context of continuous reporting, Cynotech shareholders have had a swathe of material relating to the company & its financial position, since January of this year”. This had included:

material from Cynotech Securities Group Ltd at the time of its takeover offer concluding in March (Cynotech Holdings’ year end) regarding its perception of the financial standing of the company, as well as analysis of prior-year accountsthe half-year accountsCynotech Holdings changed its year-end reporting from 31 December (12 months) to 31 March, bringing a 15-month reporting period. “To comply with reporting requirements we issued a set of financial statements (unaudited) to December 2009, and released this to the market”, andin mid-June – within 75 days of year-end – the company released its preliminary results for the year.

“Therefore, shareholders have received 4 sets of financial statements in a period when a company which was trading under standard reporting conditions would only have prepared (or sent to shareholders) their preliminary announcement.”

 

Cynotech also held its annual meeting on 21 July.

Cynotech said NZX was aware the company’s chief financial officer resigned effective 7 May, “pretty much in the middle of the audit. We are a small team and, while we do have the necessary accounting skills, this has placed a significant burden on remaining staff. Finally, Cynotech believed it was the only listed company that had bought loan books and, because of its public reporting & need for an audit, was the only company which had to determine a value based on a fair-value assessment in respect of 5000 individual loan accounts. “As the fair-value loans are a material item in our balance sheet, and the uplift can affect group profitability, they need to be satisfied the fair-value determination is correct. In the 5000 loans in this fair-value category, there are different categories of loan status. Each loan category needs to be tested one between the next, and within a category there needs to be testing. This in particular has taken longer than planned, and the departure of our chief financial officer has not helped in this process as he had a lot of the base calculations knowledge.”

 

NZX response

 

NZX Market Supervision responded by setting out its rules – which weren’t in dispute – and, in its reasons for declining to grant a waiver, said: “Issuers’ annual & semi-annual reporting obligations serve to ensure that securityholders are provided with necessary information to assess & value an issuer’s securities, as well as providing comfort to the wider market by aiding transparency and removing opportunities for insider trading.

“In the case of annual reports, the requirement that the financial statements contained in those reports be audited provides surety as to the method & basis of the preparation of the issuer’s financial statements.

“In this instance, holders of Cynotech’s securities have not had the benefit of audited financial statements since 1 April 2009, these having been prepared for the 12 months ended 31 December 2008. Accordingly, NZX Market Supervision has been provided with no evidence that securityholders have been provided with information that provides a benefit which is comparable to that of an audited annual report.”

 

NZX Market Supervision said it wasn’t appropriate to waive a rule “where an issuer has failed to take appropriate action to proactively meet their obligations under the rules. That Cynotech has aspects of its business, such as the need to conduct fair-value assessments in respect of about 5000 loan accounts, that may mean the preparation of its audited accounts takes more time than may otherwise be the case, does not provide a reason to waive the application of the periodic reporting requirements.

 

“It is up to each issuer to ascertain how long it will take to prepare audited accounts and take appropriate steps to ensure this is done within the timeframe stipulated by the relevant listing rule.”

 

It said the purpose of suspension where an issuer failed to meet the reporting requirements “is to protect potential investors by removing opportunities for individuals to capitalise on an inequality of information and the potential for insider trading in the absence of the relevant report.

 

“The practical effect of granting the waiver sought would be to allow Cynotech’s securities to continue trading in the absence of the market receiving Cynotech’s annual report. In this instance, NZX Market Supervision has been provided with no reason that would outweigh the protection afforded to the market by such a suspension.”

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Cynotech suspended

Published 11 August 2010

Cynotech Holdings Ltd were suspended from trading on the NZX from yesterday because the company hasn’t filed its annual report, which it was required to do by 2 August.

Earlier stories:

4 August 2010: Cynotech talks departure, NZX talks suspension

2 August 2010: Cynotech looks at alternatives to NZAX

16 June 2010: Cynotech slips to loss

14 April 2010: Remaining Cynotech shares to move to NZAX

23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions

28 September 2009: Cynotech pulls dividend after closer look at state of finance sector

 

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

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Cynotech talks departure, NZX talks suspension

Published 4 August 2010

Allan Hawkins’ Cynotech Holdings Ltd said last Friday it was looking at alternatives to the NZAX for the listing of its securities. Yesterday, NZX said that unless the company filed its annual report by next Monday, 9 August, those securities would be suspended from trading next Tuesday.

 

Cynotech was supposed to have filed its annual report for the March year with the exchange by 2 August. The exchange gives issuers 5 days’ grace before suspension.

 

Earlier stories:

2 August 2010: Cynotech looks at alternatives to NZAX

16 June 2010: Cynotech slips to loss

14 April 2010: Remaining Cynotech shares to move to NZAX

23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions

28 September 2009: Cynotech pulls dividend after closer look at state of finance sector

 

Want to comment? Go to the forum.

 

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

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Cynotech looks at alternatives to NZAX

Published 2 August 2010

Cynotech Holdings Ltd said on Friday it had decided to pursue an alternate to NZAX listing for all of the equities it has on issue. Group general manager Brett Tawse said in a short statement to NZX: “Shareholders need to be aware it is the board’s intention that Cynotech Holdings equities will still be listed, just that this may be on an alternate exchange.” Cynotech shares were listed on the NZX main board until April, when chairman Allan Hawkins’ private company, Cynotech Securities Group Ltd, completed a formal takeover bid with acceptances from 78.4% of ordinary shares, 51.4% convertible preference shares & 71.9% warrants, leaving only a small portion listed. Those securities were moved to the NZAX.

 

Earlier stories:

16 June 2010: Cynotech slips to loss

14 April 2010: Remaining Cynotech shares to move to NZAX

23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions

28 September 2009: Cynotech pulls dividend after closer look at state of finance sector 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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