Somers-Edgar's Orange Finance faces receivership

Friday 13th July 2012

Orange Finance, the lender owned by Doug Somers-Edgar and managed by his Matrix Funding Group, expects receivers will be appointed at the end of the month when its three-and-a-half year moratorium draws to a close.

The Auckland-based finance company's freeze on the remaining $11.3 million of debenture stock comes to an end on July 31, and "it is expected that a receiver will be appointed by the trustee to realise any remaining assets of the company," Orange said in financial statements lodged with the Companies Office.

As at the March 31 balance date, the lender had repaid $12.7 million and reduced its liability by $2.4 million in a debt restructure. It repaid a further $1 million in April. That implies the lender has some $633,000 in cash and equivalents.

The use of deferred repayment plans by a slew of finance companies including the likes of Hanover Finance and Strategic Finance prompted the government to introduced tougher disclosure rules for moratoria and increased trustee supervision.

The proposals were characterised as "usually the slow-death of the company rather than the quick death of the company," by Jane Diplock, the former chair of the now-defunct Securities Commission.

Somers-Edgar advanced $2 million through a family trust as part of the initial moratorium proposal by buying part of two separate loans.

He stopped taking director's fees, a salary or dividends since the freeze, though his Matrix Funding Group charged $274,400 in management fees for the 2011 financial year. That was down from $324,000 in the previous two years, and $852,000 in 2009.

Orange narrowed its annual loss to $1 million from $3 million a year earlier as it wrote off $2.4 million in bad debt and recognised a $2 million charge on impaired loans. As at March 31, the carrying value of loans and advances was $6.2 million, with 80 percent concentrated in hotel and residential property. .

"Since 31 March 2012, the market in which the company operates has not improved. This is putting continuous pressure on asset values and making it more difficult to exit loans and advances," the company said.

"As a result of this and due to the inherent uncertainty of predicting future event, the director cannot state with absolute certainty that the company's asset values will not deteriorate further," it said.

Orange froze repayments to some 2,500 investors owed $25.6 million in late 2008 before convincing debenture holders to agree to a moratorium on redemptions and interest payments until the end of July 2011. That deadline was later pushed out another year with trustee Covenant Trust's approval.

Auditor Ernst & Young tagged Orange's ability to recover funds from loans as a fundamental uncertainty.

BusinessDesk.co.nz

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