Friday 22nd July 2011
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NZX-listed NZF Group says directors of its subsidiary, NZF Money (NZFML) today asked their trustee, Covenant Trustee Co, to appoint a receiver.
"Further announcements will be made in due course," NZF said in a statement to the stock exchange, in which it said directors had explored various options for a short-term funding solution.
"After giving the matter considerable thought and taking into consideration developments over the last couple of days, the Board of NZFML do not believe that such a short-term solution is in the best interests of NZFML or its investors".
A Financial Markets Authority (FMA) investigation yesterday prompted NZFML to pull its 2010 debt prospectus from the market.
FMA chief executive Sean Hughes said an inspection of the documents and records of NZF, a subsidiary of NZX-listed NZF Group, revealed "matters of concern" regarding NZF’s disclosures of asset quality and liquidity.
"NZF agreed on 18 July to withdraw its prospectus and cease issuing secured deposits under its current offer documents," Hughes said.
FMA’s investigation -- enabled by new powers of notification and inspection conferred by the Securities and FMA Acts -- was continuing, he said.
Late in the day, the company told the NZX that while it withdrew the prospectus with the intent of amending the document today or tomorrow, advice from a borrower on delayed settlements meant directors "have now decided not to proceed with the amendment".
In May, Standard & Poor's cut the credit rating of finance company NZF Money Ltd to CCC minus from CCC, citing liquidity concerns, and signalled further downgrades were possible.
"NZF’s liquidity position remains delicately placed in our view, with the company’s cash levels expected to be volatile and drop to very low levels through calendar 2011, absent a further cash injection into the business," Standard & Poor's credit analyst Nico De Lange said.
"Of greatest concern is that failure to progress the repayment of past-due loans could result in NZF running short of cash in calendar 2011, particularly if debenture-reinvestment experience is weak."
NZ Money did not have the necessary BB or above credit rating to qualify for inclusion in the Government's extended retail deposit guarantee scheme.
In March, S&P lowered the rating to CCC from B, also citing liquidity and saying the company was delicately placed.
During April, businessman Peter Huljich resigned as non-executive director and chairman of financial services NZF Group.
Earlier this year, investors with about $20 million worth of NZF Group capital notes were told they would not be getting their money back when the investments matured on March 15.
The company said their 9.75 percent rate was too far above the official cash rate.
Instead they were given an option to renew the capital notes at a lower interest rate for five more years, and told that otherwise NZF Group would compulsorily redeem the capital notes by issuing new ordinary shares in NZF to the noteholders. The new interest rate for investors who renewed the notes was set at 6 percent a year.
NZF Money began trading as New Zealand Finance (NZF) in 1997 and listed on the Stock Exchange in 2004 as New Zealand Finance Holdings, which later changed its name to NZF Group.
Three founding directors (John Callaghan, Mark Thornton and Pat O’Connor) are still key shareholders in the business, according to the company's website. Its shares last traded at 20c each, but did not trade today.
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