Krukziener puts bondholders back on hold

By Campbell McIlroy

Friday 19th October 2001

ANDREW KRUKZIENER: Failed to meet third deadline

GLENN CLARK: Five months really too long to wait

Beleaguered Metropolis developer Andrew Krukziener has failed to meet a third deadline to front up to bondholders.

Trustee Tower Trust issued a letter to bondholders this week, saying "completion of the prospectus is still some time off."

In the meantime, Mr Krukziener is incurring default interest of $13,000 a day.

The tortuously slow process has made progress, however. Mr Krukziener has managed to renew ANZ Bank's first mortgage but no details were available on the terms of the loan.

It is also not certain whether the $6.6 million worth of sales mentioned in an earlier letter from Tower to bondholders on September 6 has been put toward to the ANZ mortgage.

At last report, ANZ was owed $15.5 million; if the sales have been completed and paid to the bank this would put the total outstanding to the ANZ at $8.9 million.

When Mr Krukziener defaulted on May 21 there was a total of $25.4 million owing to bondholders. Penalty interest, at a punishing 19%, took that total to $27.4 million yesterday.

But the delays and hollow promises are nothing new to bondholders. In August last year (NBR, Aug 11, 2000), Mr Krukziener said he was confident he would repay the bonds by Christmas. He told the New Zealand Herald (Feb 2) the bonds would be repaid on time with a combination of sales proceeds and new bank debt.

However, since the bonds have defaulted Mr Krukziener has wisely been much more circumspect about setting dates.

On June 19 he issued a press release stating bondholders would receive "all the net proceeds from the sale of remaining units in the development." The statement also said "a prospectus outlining the proposal will shortly be sent to bondholders."

Four months to the day and bondholders still have no idea where they stand or exactly what Mr Krukziener proposes.

Tower Trust general manager Glenn Clark said Mr Krukziener had also committed to dates in August and October for issuing a new prospectus that he had not been able to meet.

In his letter to bondholders this week Mr Clark said he was reluctant to estimate a timeframe for the completion of the prospectus. The delays were said to be due to legal and accounting matters Mr Clark was not willing to discuss.

But he was adamant bondholders should not be in such a position of uncertainty.

"It's fair [Mr Krukziener] should be able to put a revised proposal together, but frankly five months is really far too long for [the bondholders] to wait. But given the history of delays to date it's always a risk there will be further delays."

Developers in Auckland have no doubt Mr Krukziener is working hard to extricate himself from the debacle and pay back bondholders. Many also question why the financier that put the bond deal together, UPC, and Money Managers, which sold the bonds to its clients, have not been held to account.

While questions remain over how exactly the bond issue was promoted to investors, and to what extent they were made aware of the risks involved, one banker said Mr Krukziener had agreed to the deal and it was his debt, whether he was personally liable or not. "The least he could do is tell bondholders what's going on," the banker said.

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