Receiver flags Strategic loan book sale by mid-June

Friday 7th May 2010

Strategic Finance receivers Colin McCloy and John Fisk of PricewaterhouseCoopers have flagged a “formal sales process” for the failed finance company’s loan book in the next six weeks.

The receivers for the finance company told the 11,000 investors owed $391.5 million that it won’t announce any potential recovery range until the sales process has been completed, and it is putting out feelers in Australia and Asia to test whether there are other parties interested in the loan book, they said in their first letter to investors.

“We have received several expressions of interest regarding the purchase of SFL’s loan book (either in whole or in part),” McCloy and Fisk said in their letter.

“We will be running a formal sales process with indicative offers for the loan book due by mid June 2010. This will enable the receivers to assess the level of interest in the loan book and any indicative offers against the expected realisation in the receivership.”

Strategic Finance was sent to the receivers in March by trustee Perpetual Trust, ending a moratorium arrangement that had been in place since December 2008. The finance company missed its milestone repayment on Jan. 7 after it failed to generate enough loan recoveries, and former chief executive Kerry Finnigan had put a Hanover-style debt-for-equity swap before the trustee in a bid to stave off receivership.

The company’s loan book, which is the company’s most valuable asset, has a net value of $229.1 million, though McCloy and Fisk emphasised that they hadn’t “independently verified all of the information” and were relying on the figures provided to them.

Some $96.8 million, or 42%, of the net loan book was secured with a first ranking priority over the underlying property, and about $131.4 million of the assets had a second-ranking priority. Of the 87 loans, 25 of the borrowers were either in liquidation, receivership, or the property had been, or was in the process of, a mortgagee sale.

“We note that there are some loans that are secured by mortgage with a third-ranking priority; however, the majority of these loans have been fully provisioned,” the receivers said. “The extent of prior ranking charges and the actions taken by the prior ranking charge-holders could have a material impact upon the level of recovery that we are able to achieve in the receiverships.”

The receivers said they will undertake a full investigation into the affairs of the Strategic group of companies and will notify the appropriate government authorities of any potential breaches of legislation of the trust deed.

Commerce Minister Simon Power referred Strategic Finance to the Securities Commission after lobbying from ACT MP John Boscawen, who raised concerns about the status of some of the failed finance company’s second-ranking mortgages in Parliament last year.

Businesswire.co.nz

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