Monday 31st May 2010
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Dorchester Pacific, the financial services company seeking to raise $10 million to exit its moratorium, reported a full-year loss of $19.1 million.
The net loss narrowed from the previous year’s loss of $25.4 million, the company said in a statement. The loss included what the company called a $16 million reversal of a fair value adjustment that arose from deferred payment plan agreed by debenture and note holders in December 2008, it said. Sales fell 31% to $17 million.
The finance company is part-owned by Business Bakery, the group behind 42 Below and Ecoya Ltd., and Hugh Green, and both shareholders have indicated they will support the capital raising plan, which needs to meet a minimum target of $8 million. The company is dangling the prospect of investors getting paid out 100% of what they’re owed if the restructuring plan succeeds. So far it has repaid about 50 cents in the dollar.
The full-year results included provisioning of $1 million for the Erceg loan and a further $1.9 million against residual loans and property. As at March 31, shareholder funds sank to a negative number of -$2.8 million though the company is forecasting a return to positive $25 million following the capital reconstruction plan.
Under the plan, the company will issue four types of securities to some 7,200 debenture holders still owed $84 million, including units in a property trust holding $33 million of hotel properties, $20 million of notes, 36.5 million new shares in Dorchester and options to buy shares.
The proposal, which hasn’t yet gained formal approval from trustee Perpetual Trust, also requires approval from shareholders and noteholders.
Shares of Dorchester, which trade infrequently, were last at 13 cents on May 28 and have climbed more than 70% in the past 12 months. Still, they’ve tumbled from more than $2 in May 2007.
Dorchester plans to hold a meeting to vote on the plan on June 17 and if successful would be out of moratorium by July 1, enabling the firm to resume taking money from the public by way of deposits.
The firm’s Dorchester Finance unit is ahead of forecast in collections and bad debt recoveries from its residual Senate motor finance book. Under the terms of the moratorium, it was allowed to make new loans on motor vehicles and had lent some $6 million in the year through March.
Its Dorchester Life insurance, savings and reverse mortgage businesses had pretax operating earnings of $1.8 million, which it said was double the profit budgeted for.
Executive director Paul Byrnes said a successful capital reconstruction would see the company not only returning to profit but then able to participate in the “inevitable” further consolidation of the finance industry.
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