Failed Property Finance to put restructuring deal to investors

By NZPA

Friday 2nd November 2007

NZAX-listed Propertyfinance Group (PFG) said it plans a meeting of debentureholders to discuss a restructuring proposal that would allow its finance company Propertyfinance Securities (PFS) to come out of receivership.

The Canterbury company collapsed in August along with a string of other finance companies that faced liquidity problems as investors shied from the sector.

PFS owes about 4000 retail investors $80m in debentures and has issued about $550m of mortgage-backed debt securities to institutional investors through which it funded its residential and commercial loans business.

Trustee Guardian Trust holds PFS assets of loans and cash valued at $670m.

Debenture stock holders will be asked to extend by three years from December 19 meeting date, the maturity dates of their investments. An extraordinary resolution would need 75% support.

Principal and interest payments would be made as the PFS assets are realised. The expected interest rate would be 9.33% -- equivalent to the weighted average rate which was payable on PFS's debenture stock at the time of receivership.

If the resolution is approved at the Auckland meeting, the first payment, comprising interest arrears and an initial principal payment, is expected to be made on December 21.

If the resolution is passed, PFS will effectively become a non-trading entity with an orderly wind-down of its assets and liabilities, said PFG, which would manage the wind-down. The meeting is conditional on a number of aspects including the completion of a short form prospectus, agreement with the Trustee on the size of a capital injection to PFS by PFG and rescheduling PFS's unsecured creditors.

PFG's managing director Darryl Queen said the restructuring proposal was clearly in the best interests of investors.

"We anticipate an orderly wind-down will see a complete recovery of principal and interest for debenture stock holders."

He said he was "comfortable and confident", after talking to the main financial advisers who put investors into PFS, the resolutions would pass.

Rather than raise money through advertising, as many finance firms do, PFS was recommended by eight financial advisory firms.

PFG plans a series of meetings throughout the country prior to the special meeting to brief debentureholders.

Queen said the restructuring would have a positive effect on PFG, allowing it to consider commercial property lending opportunities using funding trusts it had established and other opportunities in the property market. However, 95 percent of PFG's assets are in PFS.

The stock exchange in September agreed to lift the share trading suspension on PFG. It has around 400 shareholders.

PFG shares traded at $1.10 before their suspension. They last traded at 30 cents and were bid today at 15 cents.

PFS has always contended it has a surplus of assets to liabilities. It collapsed due to liquidity problems.

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