Capital + Merchant in receivership owing $190m to 7000 investors

By NZPA

Thursday 29th November 2007

Capital + Merchant Finance, a high profile finance company that sponsors news breaks on TV One, today became the twelfth finance company in under two years to collapse.

Preferred US-based creditor Fortress Credit Corp, owed around $70 million, called in the receivers today.

C+M trustee Perpetual Trust had appointed its own receiver, KordaMentha (previously Ferrier Hodgson).

The company owes about $190 million to 7000 investors, receiver Richard Simpson of Grant Thornton said. It was too early to tell how much of that money would be recovered, but more details were expected next week, he said.

The High Court at Auckland confirmed the receivers' appointment today.

"We were actually appointed last week, but there's been some dispute about whether there were breaches, and that's been dealt with by the courts," Mr Simpson said.

Capital + Merchant Finance Ltd and Capital + Merchant Investments had breached agreements with the Australian branch of Fortress, which has a prior charge over assets.

C+M's main owners and directors Neal Nicholls and Owen Tallentire were also current and former directors, respectively, of National Mortgage Brokers Ltd, in voluntary liquidation.

Tallentire is also a director of 19 other companies including Blue Water Finance, Autocash Ltd, Finance Brands, Rapid Loan Ltd, Boatloan Ltd, Numeria Finance Ltd, Quickloan Ltd, NZ Loan Ltd and Home Improvement Finance Ltd.

US listed Fortress increased its $18m loan to $22m to C+M earlier this year, which is not due to expire until next year. C+M, which had borrowed $18m at the end of August, had also secured a loan facility of up to $50m with Fortress through a subsidiary, of which $46.9m was drawn down.

The loans were an attempt by the company to diversify its borrowing pool, after reinvestment rates had fallen to 30 percent in August from a 50 percent average over the previous year.

"The current rates, along with our policy of retaining cash reserves by reduced lending and the use of other funding facilities, are more than sufficient to offset the slowing up of funds inflow that we have experienced, along with the rest of the industry," the company said in its prospectus.

The company was struggling to attract new funds and retain existing investments as credit dried up in the wake of a global credit crunch, the receivers said today.

C+M, which had a loan book of over $200m in the property and property development sector, had raised its public profile with advertising, including attaching its name to television news bulletins.

According to the company's financial statements, cash fell to $11.3m as at the end of March from $31.9m a year earlier. Debentures fell to $76m from $116m a year earlier.

Lloyd's of London had insured an annual loss provision of $20m for the secured debenture funds.

The company said in its prospectus that it believed any loss to the debenture funds would be covered by the insurance, shareholders' funds and capital notes.

Twelve finance companies have now hit trouble in under two years, including nine this year as a result of a global credit crunch, owing investors more than $1.5 billion, although some of that had been recovered by various receivers.

One of Fortress Investments' specialties is the investment in undervalued and distressed assets. The New York-based fund, with more than $US30 billion ($NZ39 billion) under management, has also lent $30m to New Zealand's Instant Finance.

Comments from our readers

No comments yet