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Strategic Finance receivers paint ugly picture for investors

“Low ball” offers to investors in failed Strategic Finance are perhaps not as far off the mark as their detractors might think.

Receivers for Strategic have released their latest six monthly report to the Companies Office, stating an estimated recovery of 12 to 35c in the dollar of the principal amount outstanding to secured debenture holders owed $367.8 million.

That compares with a recent 5c unsolicited offer from Australian-based Stock & Share Trading Company to buy debentures from investors.

John Fisk and Colin McCloy of PricewaterhouseCoopers said they were now confined to managing Strategic's loan book after offers to buy it fell short of "even our low” estimate of gross recoveries.

The best outcome was therefore for the receivers to continue to realise the loan book, they said.

“We note that one of the offers also provided for some possible future upside, however, based on the information provided, we considered that any potential upside may be difficult to achieve and so could not be relied on in our overall assessment."

Reasons for low bids to buy Strategic assets included the high proportion of second mortgage positions and the complexity of loan participation arrangements.

The major property loan book consists of 87 loans made to borrowers either directly through Strategic Finance or through Strategic Nominees or Strategic Nominees Australia.

Approximately 58% ($131.4 million) of the net loan book is secured by second mortgages, the receivers said.

Strategic’s directors are Kerry Finnigan, Graham Jackson, Jock Hobbs, Marc Lindale, Denis Thom and David Wolfenden.

This week the Securities Commission warned all debenture-holders in Strategic Finance to be wary of another offer by Stock & Share Trading Company to buy their debentures for five cents in the dollar. 

The commission urged investors to be cautious of any unsolicited offer to purchase their investments, especially where the offer "is well below face value" and seek independent, professional advice before making a decision to accept any offer. (See Sec Com guidance here)

PWC emphasised in its latest report there were still considerable uncertainties relating to the recoverability of Strategic’s property loans, many of which were for development land and bare land subdivisions, including in Fiji.

“We consider that the “high” range estimate reflects some optimism in the level of loan recoveries, particularly in respect of SFL’s four largest loan exposures.

“Any difficulties in respect of the recovery of these four loans will have a significant adverse impact on the overall level of recoveries.”

PWC said it was working co-operatively with the liquidator of Strategic, John Cregten of Corporate Finance.

More by Duncan Bridgeman

Comments and questions

Bollocks the offer made of 5cents is more likely.

Hopefully the Securities Commission and SFO are at an advanced stage of laying charges against Jock Hobbs , Kerry Finnigan and the rest of teh merry bunch of losers.

Strategic Finance's 2nd mortgages are not backed by any tangible asset security; it was basically the funding costs for the developer to kick-start the projects. They are all worthless!!

If you look back all these offers, on Strategic and others, have been near the money.

What needs to be looked at is PWC credibility. Reviewing Strategic before the moratorium vote - under which Strategic promised a 100% recovery - and concluding no difference between the proposed moratorium and a receivership. Now PWC is down to 12c! PWC what gives?

PwC were so far off the mark, you have to wonder if they got paid by SF to make those predictions. The stench is overpowering.

Just remind me how much cash did Fitzy, Marcel,Jacko, Hobbs,Bublitz pull out when they sold Strategic to the Aussies?

Better question - how much did they take out by way of dividends ( simulatneous with the Forsyth Barr Perpetual note issue ) and prior to the sale to Allco.

No morals or ethics with these guys - and two of them were also major participants at Equiticorp in the 1980's. They forot to mention that in their profiles when they raised money from the public.

Surely the authorities will nail all of these guys so that none of them can work anywhere near investors again..

Mind you - with the amount of money tehy have rorted from investors, they probably don't need to.

Next thing they will become philinthropic with their ill gotten gains and we will be reading what wonderful generous guys they are. Worse things have happened.

And poor old Jocko thought he was in line for a knighthood at one stage

Yes, agreed but somehow I just can't see Fitzy being Philanthropic?

And Charlaton Kerry is still trying to conjure deals with Swindler
Hotchin re Matangi Estate. Lets hope they get nailed and bring back the stocks.

Those boys were absolute investment legends (a) Soho, (b) Bendemeer, (c) Albany leasehold, (d) five mile - lucky it wasn't their money at risk because now they have more to be Philanthropic!

PWC have shown their (professional) advice has been far from the mark. Isnt it time they put some sink in the game, instead of just gouging fees. For example, if they dont recover more than 12 cents in the dollar, they dont get paid.

Some jail time for past & present directors would send the right signal to these crooks, and provide much needed confidence to future investors in securities of this nature.

Three strikes and you're out

Salisbury Forstry Tax deals
Strategic Finance receivership

Game over

Why has it taken so long?

Only greedy Kiwi investors are caught, not the ordinary bank depositors.

Well now.. PWC will shortly have to STOP writing reports and living off the Strategic cash they intereied at the time of receivership. Debenture holders would be horrified to know the extent to which some real and good offers for assets have been presented which PWC have ignored !! Root of the problem is PWC taking advice from ex-Stategic employees dealing back-handers to and from Queenstown real-estae agents.

Like most of NZ business there is a huge conflict with this receivership.

Director Graham Jackson is known well to Colin McCloy of PWC - they used to work for associated companies from the same offices. Worse still at that time McCloy worked for Ferrier Hodgson ( now Korda Mentha ) and the alternative receiver for Strategic would have been Grant Graham of Korda Mentha - a personal friend of Graham Jackson.

Funny old world - or should I say small world.

Why do Tim & Charlotte Vickers think it is okay to show off on the society pages, when they made their money from sale of shares in SF to Allco

Because they are dorks - Tim did nothing of note before he joiined Strategic and has done nothing since - maybe his skills are suited only for dodgy finance companies with other peoples money.

Also no difference to the Strategic consultant buying a house in NZ's most expensive street in the last year or so - they have no scrupples, morals or ethics - but tehy have a lot of cash and most Solicitors waiting to take some cash off them to defend them - there are not many Solicitors with morals or ethics either.

Maybe Tim Vickers and teh other Strategic Finance directors and consulatnt can sell up their assets and repay the proceeds to the receiver so he can distribute the proceeds to the investors.

From previous articles and announcements that would be about $150m in cash which would go a long way towards getting the investors their money back. Jock Hobbs comes across as such a pillar of society - a man of real integrity - time will tell I suppose how genuine Jock and his mates are..

I am so confused. No less than Chris Lee, that very solid investment advisor who had his own risk ratings, rated Strategic Finance very highly before it crashed.

How can he be wrong? He cannot be wrong as he is always right. So it must be because the company has misled him?

Excerpt : "Another excellent company offering investors something interesting is Strategic Finance, whose shares are now owned by Allco in Australia, a very substantial company.

Allco has created a public listed company Allco Hit, which will own Strategic Finance and be available to New Zealand investors though is Australian listing.

We selected Strategic, as we did St Laurence and South Canterbury Finance, many years ago, largely because of the excellence of their people, their long term personal commitment and their access to genuine capital.

Strategic, as is the case with the other two, have certainly justified that confidence."

Does anyone honestly believe that the Strategic directors et al have any assets in their own names? What are the odds everything's owned by "family trusts" or else salted away in a tax-free haven?