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Strategic Finance first-half loss worse than expected

Monday 1st March 2010

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Strategic Finance, which sparked two review events under the terms of its moratorium arrangement in January, posted a worse-than-expected first-half loss of $99.8 million.  

The firm was preparing for an $86 million loss in the six months ended December 31, but provisions of $107 million and bad debt writeoffs worth $15 million extended the loss. Strategic made a loss of $32.8 million in the same period a year earlier, and reported full-year impairments of $146.5 million in the 12 months through June.  

“The board wishes to emphasise that these results are unaudited and preliminary and that the final audited results may be different due to changes in loan provisioning or other reasons,” the company said in a statement. “We expect to have the audit complete before 31 March 2010, however the board is issuing its preliminary unaudited results now to meet the reporting period requirements under the NZX listing rules.” 

Strategic sparked a review event under the terms of its moratorium in January when it failed to meet its first repayment to debenture holders, though it was successful in repaying its $25 million facility with the Bank of Scotland.

A second event occurred when it had to increase its provisioning for bad loans, pushing it beyond the ratio of total loan book value against the aggregate principal monies owed of 75%, as required by trustee Perpetual Trust.  

Chief executive Kerry Finnigan blamed the moratorium timetable for some of the company’s woes, saying debtors tried to use the looming payment to bargain down their own repayments.

He has confirmed the company is looking at a potential Hanover-style debt-for-equity deal to get Strategic out of its financial mire.  The company will provide an update on its discussion with its trustee “shortly”, after which KPMG will be able to resume its audit of the finance company.  

Strategic froze repayments to some 15,000 investors in 2008, going into moratorium in December of that year, when it promised to repay some $325 million over a five-year period.  

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