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Dominion Finance bad debt provision exceeds $80m

Monday 1st September 2008

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Dominion Finance Holdings, whose shares have lost almost 100% of their value, increased its provision for bad debts to NZ$80 million and will write off NZ$26.6 million of goodwill after failing to win support to recapitalise the business.

"The board has no choice at present but to try and secure agreement for the orderly wind-down of the subsidiaries, exceed the loan recovery estimates and look for ways to improve the return to capital note holders and shareholders," chief executive Paul Cropp in a statement.

Trustees of Dominion Finance rejected a bailout plan last week, forcing the company to put a proposal to stockholders and its banks to sell the assets of Dominion Finance Group and North South Finance, its main sources of revenue. They suspended debenture payments in June for an unspecified period because of a liquidity squeeze.

A slump in confidence in the domestic finance sector "has almost created the demise of debenture based funding and the subsequent implications have created a contagion effect to property based funds and mortgage trusts," Cropp said.

There is the prospect, though no guarantee, that debenture holders and the company's banks will be repaid in full, provided there's no further deterioration in the markets, he said.

The shares traded Friday at 2.5 cents.

By Jonathan Underhill

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