Wednesday 25th June 2008
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When asked about the decision he told Good Returns he felt “a bit of relief actually.”
“We grappled with whether we should do this,” he says. But “I do believe it’s the right thing to do.”
The lending operations make up about half of St Laurence’s business with the other bits being funds management, management of the National Property Trust and syndicates.
Currently St Laurence has around 40 loans totaling $160 million and around 9000 investors.
The problem for the group is simple. It can’t get money in the door either from investors or from people loans have been made to.
Podmore says a year and a half ago reinvestment rates were around 64%, in April they were around 50% and this month they “plummeted” and are “below 20%”.
Meanwhile people loans are having trouble raising cash with developers being unable to sell properties and sales not settling for a variety of reasons.
Podmore says St Laurence isn’t technically in default, however modeling suggests if there is more slippage things could change.He says the company has around $10 million cash in the bank, but that figure is way down on the $50 million it has previously recorded.
Podmore says debenture holders will be asked, in August, to approve a repayment plan which could see it taking two years for full payouts to be made.
If the plan isn’t approved St Laurence “could go into receivership”.
He says the decision yesterday was being made early to ensure there is value in the company’s assets. His view is that companies which leave it too late “disapate value.”
From Podmore’s perspective he is doing what he thinks is right for the company, investors, staff and shareholders.
The goal is to repay everyone and have something left over for shareholders. He says if other assets, such as part of the management contract for NPT have to be sold to refund investors then that is what will happen.
Podmore says it has taken 14 years to build the business up and he would like to see some return.
He says he has no intention of re-entering the lending business and wonders about the future of finance companies. When asked about the future of the sector he said: “I think it will disappear.”
While some, notably the big ones, will probably survive, he felt property based companies will struggle and those in the consumer lending space will not be able to compete with GE.
“The majority of players will disappear,” he predicts.
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