Finance company Western Bay in receivership

By NZPA

Receivers Ferrier Hodgson were called in today to assess the quality of Western Bay's loan book, which has about 10,000 loans totalling $53 million.

Receiver Grant Graham said "a good number" of the 30-odd staff would continue working and that the picture for debenture holders would be clearer next week.

Finance Now, a subsidiary of Southland Building Society, has been undertaking due diligence in Western Bay's loan book and Graham said they would be evaluating whether a deal could still be worked out.

A source close to the situation said that debenture holders could do better out of this receivership than other recent finance company collapses.

Western Bay stopped granting new loans in June after the supply of funding from retail investors dried up.

Its trustee, Covenant Trustee Company, sounded the alarm over its debt levels on June 20, when auditors told the finance company it needed to lift equity levels after its provision for doubtful debts rose from $2.67 million to $12.4 million.

This placed the finance company in breach of its liabilities-to-assets ratio, which does not allow the company to have debts over 90% of its asset base.

Covenant's managing director Graham Miller said Finance Now had originally considered taking $40 million of the company's assets but then altered the deal.

"The directors were unable to determine if this offer could reasonably be accepted and in the light of the existing breach...have requested the trustee to appoint a receiver."

Western Bay chairman Jim Smylie has reportedly blamed the company's position on negative publicity from the failures of Christchurch's Provincial Finance and Auckland's National Finance 2000, which meant that Western had no money to lend.

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