Failed lender Strategic Finance settlement sum gets small boost after action against insurer

Failed lender Strategic Finance's near-three-year-old $22 million settlement got a small cash injection after action against an insurer, receivers said.

Receivers John Fisk and David Bridgman of PwC said an additional $1.03 million has been added to the settlement sum, under the terms of the deal between the Financial Markets Authority and the failed lender, they said in their latest report. The receivers noted no public or receivership monies were used to fund the claim.

According to the report, distributions to secured debenture investors to date total 20 cents in the dollar, or $73.5 million, in total interim distributions, including a payment of 1.2 cents between September last year and March 2017. Some 10,000 secured debenture investors had invested $367.8 million in 12,900 investments when Strategic was sent to the receivers in March 2010 by trustee Perpetual Trust, ending a moratorium arrangement that had been in place since December 2008. 

Regarding Strategic Finances' property loan portfolio, the receivers said there are two material loans left where the underlying properties are not under contract or subject to any arrangement for sale, and two others where Strategic holds a second mortgage and with substantial amounts owing to the first mortgagee.

One property has had receivers appointed and "we still expect there will be no funds available to Strategic," Fisk and Bridgman said. On the second, a settlement was reached with the developer and a payment of $5.5 million was received during the six months covered by the report. 

Between Sept. 13, 2016, and March 12, 2017, Strategic received net realisations of about $6.2 million from the recovery of the property loan book, including recoveries under guarantees. "We do not anticipate any further realisations in relation to the loan book," the report said. 

The receivers expect to make one final distribution to secured debenture investors later this year, assuming a final guarantor recovery is paid on time. "We will then be in a position to retire from the receivership," they said. As of March 12 the receipts and payment summary showed a balance of $3.79 million. 

Because of the estimated return to secured debenture investors "we regret to advise that there are unlikely to be any amounts available for payment to unsecured creditors," the receivers said.

The Securities Commission, the Financial Markets Authority's predecessor,  began investigating Strategic in 2009 when former Act Party MP John Boscawen told Parliament the finance company misrepresented about $68 million worth of debt which it classified as second mortgages when they were effectively a third-ranking security. Former Commerce Minister Simon Power subsequently referred the matter to the regulator.

(BusinessDesk)