Dorchester Finance says investors could be repaid their capital over three years under a managed wind-down, despite the company adding $10 million to provisions against its property loans.

Dorchester chairman Barry Graham says the board hopes to put proposals to investors in time for a vote before Christmas.

An initial repayment of 20% capital could be made before Christmas if it passed.

The company owes investors some $168 million and froze funds at the end of August.

Dorchester’s property loan book has deteriorated further, with an extra $10 million provisioning made against the loans under the moratorium plan.

Parent company Dorchester Pacific also announced today that it has negotiated an option to take up extra shares in St Laurence under that firm’s recapitalisation and moratorium plans.

If Dorchester does not take up its option, its stake in St Laurence will dilute from 25% to 1% because Kevin Podmore’s Auguste Finance will inject $10 million into St Laurence if the plan is approved.

Dorchester Pacific has three years to take up its share options after St Laurence’s plan is approved. The options will take Dorchester’s stake back up to 25% for $3.333 million, payable in cash or equivalent assets.

Dorchester has completely written off the value of its investment in St Laurence, which at the end of March was valued at $21.3 million
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At that time, Dorchester Pacific’s shareholders’ equity was sitting at $41.7 million.

But after the St Laurence write-down, loan provisions and trading losses for the six months ended September 30, the value of shareholder funds in Dorchester Pacific is now estimated at just $5 million.

Dorchester shares were down 40% to 9 cents this afternoon.