Sharechat Logo

Bridgecorp was on a path to insolvency when it issued its prospectus, Crown says

Wednesday 11th September 2013

Text too small?

Bridgecorp, the failed finance company whose directors were imprisoned for making false statements in offer documents seeking investor funds, was on the path to insolvency when it issued the prospectus in 2006, Crown lawyer Brian Dickey told the Court of Appeal today.

The company's former chief financial officer Rob Roest is appealing his High Court conviction and six-and-a-half year sentence for making untrue statements in the prospectus. Bridgecorp collapsed in 2007 owing $459 million to 14,500 investors.

The prospectus was "an act of desperation" as the company sought to shore up its cash position, but it didn't sell it to the public that way, Dickey said.

Bridgecorp was in a liquidity squeeze with optimistic cash flow projections which weren't being met, as problem loans which couldn't be repaid were rolled over instead of being classed as impaired, Dickey said.

To bolster its cash position, Bridgecorp in September 2006 turned to rival finance company St Laurence for a higher interest rate secondary loan to pay investors when maturities fell due as reinvestment rates declined and new investment money dried up, he said.

"Bridgecorp did not fail unexpectedly or it shouldn't have failed unexpectedly to its directors," Dickey said. The company's financial position "very patently paints a picture that this company is on a trajectory to insolvency at the time it issued the prospectus."

At December 2006, as Bridgecorp was looking to tap investors for more funds, it had about $480 million of investor funds under its care, a cash balance of about $152,000 in its bank account and about $20 million a month of debentures expiring.

"At that level, directors should have fallen off their chairs," Dickey said. "If you were awake at the wheel and you were testing the cash flow of Bridgecorp you knew week by week and month by month that they were optimistic and wrong."

In his position as head of finance, Roest would have been involved in regular executive and board reports about the company's financial position, Dickey said.

The appeal in which Roest is representing himself is in its final day and is proceeding.

BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar sags after avalanche of data and central bank action
Fonterra board starts planning chair succession
Fulton Hogan keeps Australian civil construction unit
Time for congestion pricing has come - NZIER
Colliers defends KiwiBuild as 'far from a colossal failure'
Pushpay shares rise as cost-cutting upgrades earnings guidance
20th September 2019 Morning Report
NZ dollar weaker against British pound on EC president's Brexit optimism
Todd plans Kapuni drilling campaign
MARKET CLOSE: NZ shares gain; appetite for KFC helps Restaurant Brands hit record

IRG See IRG research reports