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Strategic Finance receivers, seven years in, prepare to wind up with final payment

Monday 30th October 2017

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The receivers of Strategic Finance say they'll make one final payment to investors, lifting the total payout to 21 percent, before calling time on the seven-year saga.

To date, distributions in the receivership have been 20 cents in the dollar, or $73.5 million, for the 10,000 secured debenture investors who had invested $367.8 million in the failed company. Receivers John Fisk and David Bridgman of PwC said in their 15th report on Strategic and associated entities that their revised estimate for the final distribution is up from a previous range of 20-to-20.7 percent. No distribution was made in the latest six-month period.

"The receivers intend to shortly make one further distribution to secured debenture holders, following which the receivership will be brought to an end," they said. At the time of their appointment in March 2010, Strategic's major remaining asset was its portfolio of property loans.

In the receivers' previous report in May this year they advised that there was one material remaining loan where the underlying property wasn't under contract or subject to any arrangement for sale. The loan is a second mortgage on a property "and there are substantial amounts owing to the first mortgagee". The receivers said no funds were expected to be available and they had assigned Strategic's interest in the loan to the receiver of the borrower.

While that won't result in further realisations for Strategic, it "allows the receivership of Strategic to be brought to an end," they said. A final payment of $100,000 plus interest was received from a guarantor of a loan, they said.

Given the estimated return to secured debenture investors, there was unlikely to be anything for unsecured creditors, including unsecured depositors and subordinated noteholders, they said.

Strategic was sent to the receivers in 2010 by trustee Perpetual Trust, ending a moratorium arrangement that had been in place since December 2008, and was one of the larger failures in the finance sector collapse last decade. 

The Securities Commission, the Financial Markets Authority's predecessor, began investigating Strategic in 2009 when former Act Party MP John Boscawen told Parliament the finance company misrepresented about $68 million worth of debt which it classified as second mortgages when they were effectively a third-ranking security. Former Commerce Minister Simon Power subsequently referred the matter to the regulator.

The FMA cut a $22 million deal with the former directors and auditor of Strategic in 2014, including undertakings from the directors that they wouldn't be involved with director or promoter roles for public issuers for five years or accept a CEO or CFO role with a public issuer for three years without the regulator's say-so. 


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