Equitable Mortgages calls in receiver, calls on govt guarantee

Friday 26th November 2010

Equitable Mortgages, the deposit taking arm of the Spencer family's lending group, has called in the receiver after failing to wind down the business.

The Spencer family, who cashed out of toilet paper in 1990, also operates a finance business. It has been winding down its activities for the past three years, but the board decided the "best interest of all stakeholders lies in the appointment of a receiver."

The company, which holds mortgages, blamed ongoing asset deterioration, a lack of new loan business, investment appetite being linked to the government deposit guarantee scheme, and little sign of a future pick-up in the market.

Equitable Mortgages' 6,000 depositors owed some $178 million are covered by the government's extended guarantee, and Treasury deputy secretary financial operations Phil Combes said the department will spend about eight weeks gathering information before they will be able to contact investors. That's the first call on the extended guarantee.

About $12 million of debentures aren't covered by the extended guarantee. Equitable Mortgages said its $188 million worth of first mortgage assets haven't been tested for impairment. It has $32 million in cash.

The Spencer family injected $10.5 million into Equitable Mortgages at the start of the month, subscribing to another 10.5 million shares, according to Companies Office documents. That came as the family's investment vehicle, Toocooya Holdings, sold its stake in meat packing company Affco Holdings for $48.9 million to Talley's Group.

In August, Equitable Mortgages was downgraded to a BB- credit rating by Standard & Poor's over its poor asset quality and inability to deal with late repayments.

BusinessDesk.co.nz

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