Tuesday 11th November 2008
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Perpetual Trust will allow Dorchester's proposal for deferred payments to be put to a vote of debenture holders, saying the plan has merit. St Laurence released an outline of a recapitalisation plan that includes a guarantee from the company and its founder and a contribution of property assets.
Dorchester chairman Barry Graham said in a statement his firm faces an "increasingly tight" deadline but could be in a position to repay 20% of principal to debenture holders before Christmas if they approve the plan.
St Laurence managing director Kevin Podmore said his firm's proposal aims to repay investors in full, though the timing is unclear because of the state of the property market.
"The directors believe it is a better alternative for investors than receivership," Podmore said. "It provides time for St Laurence to have its loans repaid in an orderly fashion and allows it to undertake activities to preserve and add value to the group's funds management businesses."
Strategic Finance is still awaiting the decision of Perpetual Trust, which commissioned PricewaterhouseCoopers to assess its proposal for an orderly wind-down of its loan book rather than receivership.
"We're confident that commercial common sense will prevail," Strategic's Kerry Finnigan said in an interview. "There's a lot of pressure on the company and trustees to do something for investors. Nothing is a foregone conclusion at the moment."
Strategic's predicament became more complicated last week when Allco Hit, its ultimate parent company, appointed voluntary administrators. Talks to allow managers and directors of Strategic to acquire the company were terminated amid deteriorating credit markets.
Finnigan said there is no 'white knight' who can be added to the mix to develop an alternative acquisition plan.
"We believe receivership will deliver a worse result," he said. "The objective here is to secure an outcome we could all participate in."
St Laurence proposes paying interest due up to the date of the vote and then start regular quarterly principal repayments of secured debentures and capital notes from April 1.
Podmore says the plan is better than receivership as if that option was taken debenture holders will receive less than all of their investment and there would also be no cash available for any payments to capital note holders and unsecured creditors.
A key part of the recapitalisation plan is that the company's major shareholder, Auguste Finance will contribute new equity to St Laurence by transferring property-related assets to the company. Podmore says these assets have a net value of $10 million.
Podmore and related parties will also provide a guarantee to secured debenture holders up to a maximum of $20 million.
Under Dorchester's proposal, the firm will take additional provisions of about $10 million against property loan receivables. Dorchester won't make an immediate cash or asset contribution to St Laurence but has a three-year option to participate in that firm's recapitalization plan.
Should Auguste succeed in subscribing for new shares in St Laurence, Dorchester's shareholding would reduce to 1% from 25%.
The exercise price for Dorchester's option is $3.333 million payable in cash or by a transfer of assets to St Laurence. Meantime, Dorchester today said it will write down the carrying value of its holding in St Laurence to zero.
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