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St Laurence to miss next repayment

Wednesday 28th April 2010

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St Laurence, one of the last finance companies to try to trade its way out of trouble, will miss its next repayment to investors and will try to woo them into a debt-for-equity swap in a bid to avoid receivership.  

The finance company today announced it is “unlikely” the next payment to debenture holders on July 1 will be met. The company wants investors to decide on whether or not to accept a debt-for-equity swap that will give them control of the finance company’s assets by exchanging their debentures for shares in a St Laurence Holdings, a shell company set up last week. If investors don’t accept the proposal, the company will be sent to the receivers.  

“We understand that investors want their money back and in the current market we sincerely believe that exchanging their debt investment for equity is the best way to achieve this,” managing director Kevin Podmore said in a statement.

“It will allow us to complete our sell-down programme in an orderly manner, but more importantly preserve the value of SLL’s funds management business and hence provide a better outcome for our investors.” 

St Laurence staved off the receivers last year after it agreed to a set of key performance indicators with trustee Perpetual Trust after additional loan provisioning sparked a review. Podmore was adamant that although the targets were challenging, they were achievable at an 11% return on assets needed for the company to meet its obligations in full.  

Based on advice from McGrath Nicol, St Laurence’s directors expect class A and B debenture holders would get a further 26 to 38 cents in the dollar on top of the 10 cents they have already received over the next two-to-three years if the company goes into receivership. Capital note holders would get nothing more to the 5 cents in the dollar they’ve already recovered.  

Podmore told investors in a letter that if they decide to send the company to the receivers, its property management contracts with Irongate Property and National Property Trust would probably be sold “at a large discount to book value.”  

In 2008, some 9,000 investors in St Laurence owed $250 million in frozen funds agreed to give the company until 2013 to repay 70% of its debentures.

The other 30% of debenture holders are due to be repaid by 2021 and capital note holders by 2034.

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