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MTF shareholders vote down move to publicise Sportzone case

Shareholders of Motor Trade Finance [NZDX: MTFHC] have voted down seven resolutions put up by nine shareholders questioning the Dunedin-based auto-finance firm's handling of the Sportzone Motorcycles court case.

The shareholders who own about 8.1 percent of the company sought to force the board to reveal details of its ongoing Sportzone dispute with the Commerce Commission. When the finance company, which has a loan book of some $438 million, rebuffed a takeover offer from Heartland New Zealand earlier this year, one of the reasons given was the bank's request for information relating to the commission's prosecution currently under appeal, for which the bank wasn't prepared to enter into confidentiality agreements.

The nine shareholders sought the special meeting seeking information relating to the prosecution, which MTF says is effectively the same information Heartland sought. Of the six resolutions proposed asking for information about the case, no more than 17 percent votes cast were in favour, while the seventh resolution, which sought better communication from the company, received 24 percent in favour, MTF said in an announcement to the stock exchange.

"The proposing shareholders, including their 8.1% shareholding, received no more than 17% for the first six resolutions," chairman Stephen Higgs said . "As to resolution 7, regarding better communication, we acknowledge that we can always communicate better and will continue to improve the way in which we communicate with all our shareholders. We hope we can now put this meeting behind us and work with all shareholders and interested parties to maximise value for all shareholders."

The Commerce Commission had alleged breaches of the Credit Contracts & Consumer Finance Act and the Fair Trading Act relating to fees charged in 39 loan contracts originated by Sportzone between May 2005 and July 2008. Sportzone had an agreement with MTF allowing the defunct motorcycle business to write credit contracts for buyers of motorcycles.

Last September, following a trial in late-2012, the High Court found in favour of the Commerce Commission that some fees in its loan contracts were unreasonable, while ejecting other aspects of the Commerce Commission claims that Motor Trade Finance and Sportzone, which is in liquidation, failed to make proper disclosure of components of credit fees payable under the loan contracts. The Court also rejected a claim that the labels used for establishment and account maintenance fees were misleading, deceptive and breached the Fair Trading Act.

Both MTF and the Commerce Commission have appealed the judgement, which is to be heard in November.

MTF has $40 million of perpetual preference shares listed on NZX's debt market, which rose 1.3 percent to 67.9 cents in the dollar


Comments and questions

Just cannot understand MTF dealer shareholders sticking with this company. Very high risk for a dealer, when alternate non recourse finance solutions which are dealership profitable are now very easily available.

Born out of the Motor Trade Association who covertly ended up with the millions that rightly should have been distributed out to dealer members when the industry was re regulated in 2004 The ethos of MTF and MTA is old. back in time when regulation meant power these groups.

To the dealer members, try and get out of MTF, they make it hard almost impossible, unless one is wealthy and very patient.

Been with Heartland ever since I purchased my MTF ledger ( previously Allied then Marac) great !!! It took MTF nearly a year to pay back the value of my shares after purchasing the complete ledger.

Suggest you check your facts - MTF has no tie up with MTA, and was not 'born out of it'.

Result of voting says it all - a few troublemakers outvoted by a hugely supportive shareholder base.

Mmmm been an MTA Member & MTF shareholder have you?

MTF was formed in the late 60's early 70's pre LMVD days, when all WOF providers & dealers were or had to be members of the MTA. MTA was pivotal in it's formation as I recall.

The MTF idea was fine back then, but relied entirely on the dealer writing the business to credit check clients. The price of that was 100% recourse to the dealer. That recourse has been the demise of many good people in the industry. a Motor dealer had to buy shares in MTF to be a MTF dealer. For many years now, finance solutions have been readily available to dealer without recourse or the cost to buy into MTF and with great commissions.

They are used to being a law unto themselves.

Hope that helps - cheers

Yes Arty, I have - and am. In order for your opinion to be current, you would still need to be a shareholder yourself - yet I take it from your comments that this is no longer the case.

You can hardly say that being a member of the MTA makes your company 'born from it'.

MTF grew from a firm of Dunedin accountants. Yes, they were members of the MTA - like pretty much anyone having anything to do with vehicle industry was.

As for recourse, if you manage your finance business in a responsible manner, the recourse model will give you much higher gain. Yes, there is more potential risk to the dealer than non-recourse, but nothing that can't be competently managed.

It seems the only ones that have an issue are the ones that are trying to push the boundaries unreasonably.

Interesting, My recollection is that MTA had a founding interest in MTF, I recall MTA membership plus 5k was required to become a MTF dealer. This was early on in the life of MTF.

I disagree with your view on recourse being a manageable acceptable risk. With most loans now being close to 100% and the asset depreciation being very aggressive and the loan terms tending to be longer, the risk is very very high to a motor dealer on recourse - in my view it is risk that does not need to be taken. .

The Heartland Bank is performing well, the people are great to deal with, no recourse, efficient systems, quick pay-outs - nothing to manage or worry about, good margins paid monthly, no risk - great.