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Strategic proposes partial repayment

Monday 11th August 2008

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Strategic Finance would repay 30% of its debentures over three years and issue new bonds to replace the rest under a proposal to save the ailing finance company.

The capital restructuring is dependent on Strategic's managers, directors and partner BOS International clinching a buyout deal for the business from owner Allco HIT, the company said in a statement today.

By extending the period for repayments and amending the interest paid, Strategic may buy enough time to recover from a slump in liquidity that's hampered the company's ability to pay investors. Chief executive Kerry Finnigan last week announced redemptions of debentures and notes would be halted to protect the integrity of the investments. Trading in Strategic's perpetual preference shares was also halted.

NZX Regulation today released a note Finnigan sent to investors in which he says conditions in the finance industry had continued to deteriorate during the due diligence period. To shore up Strategic's position, HBOS, a unit of Halifax Bank of Scotland, would extend its funding facility for Strategic to NZ$150 million.

Holders of the preference shares will be asked to agree to release Allco HIT from its guarantees, according to the statement.

The company had assets of $568 million at June 30, with debentures at $320 million. Strategic's 10.52% perpetual preference shares trade on the NZX debt market.

By Jonathan Underhill

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