Strategic Finance in receivership
Perpetual Trust has called in receivers after reviewing failed finance company Strategic Finance.
The trustee said after giving the company time to consider several debt-for-equity and/or restructuring offers from [unnamed] companies and submitting the best proposals to Perpetual, it was satisfied receivership was the best option for investors.
In a statement issued late this afternoon, Perpetual said it had appointed reveivers John Fisk and Colin McCloy of PricerwaterhouseCoopers.
Strategic directors were Kerry Finnigan, former All Black captain Jock Hobbs, Graham Jackson, Marc Lindale, Denis Thom and David Wolfenden.
"Perpetual Trust believes that receivership is the best option because the receivers will be focused on achieving the best outcome for investors, and in particular that it is expected ultimately to provide better returns for investors."
Strategic has about 13,000 investors with investments of $417 million.
One investor, who wished to remain anonymous, said the receivership was "far from ideal" but better than taking another six months for an outcome.
Strategic issued a statement saying the board was disappointed with the outcome.
"The board considers receivership to be very destructive to value and detrimental to the repayment of monies to investors."
Two proposals were well advanced and would have provided for an "immediate cash payment, ongoing income and the potential for maximum recovery for investors," they said.
Apparently Bank of Scotland, as the largest debenture holder, supported both transactions and Strategic was surprised the trustee went the other way.
Investors agreed to a moratorium in December 2008, when Strategic’s loan book was valued at $477 million. At the time, investors expected 100% of investor principal plus interest would be repaid in due course but by December 2009 the value of the loan book had declined to $220 million.
In January, Review Events were triggered because the value of the loan book was less than 75% of Strategic Finance’s liabilities and it missed a repayment under the moratorium.
Perpetual said the review had taken longer than it would have liked but it was important to establish whether a restructuring or sale would have been better for investors.
Both Perpetual and the receivers would be in contact with investors in the next few weeks with an expected timetable and advice on how much money would be realised.
Mr Fisk said in a statement the receivership would provide more certainty. "It is too early to release any further details, but we are working as quickly as we can to determine the best option going forward to ensure maximised funds are distributed to investors.
“The receivership also brings certainty to some $5.2 million of unsecured creditors’ claims that were not subject to the moratorium and provides options to review cost structures that were not available to management under the moratorium.
“We will provide a report to investors as soon as we possibly can. However, in the meantime we’ve set up a dedicated help line and web page to allow investors to ask questions and find out more information."
The phone line for investor information is: 09 355 8030.
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Comments and questions36
An end to the gravy train for the people who messed this co up in the first place
Let's see how Chris Lee gets out from under yet another of the recommendations he strongly made to his clients - after detailed analysis! St Laurence...Hanover...Strategic .... and South Canterbury perhaps yet to come!
All well qualified men with Legal and Accounting backgrounds. Even a former CEO of a major NZ Bank.
Bank of Scotland was once the owner of the Bank he headed. Makes one think, how did it all turn to custard with such high calibre directors. NOT!
The Trustee has demonstrated what a lame duck it is. Time to consider options - what a load of rubbish. Turtles move faster!
Any other outcome would have seen existing directors & execs feeding further from the trough, excessive opex, a further write down of the book and more asset sales to mates and past owners. The receiver should take a very close look at all transactions over the past 24 months !
I wonder if the receivers have the ability to investigate all major loans and their history to find that most of the major proerty transactions were originated by the directors and the company's consultant ( former director ).
Then once that is proven I wonder if they have the balls to go after the directors for the money they siphoned off personally to purchase other assets like hospitality businesses and also their independant private investment companies.
I say take every cent off these crooks and give it back to the Mum and Dad investors.
Finally sanity prevails
The Trustee finally woke up but not before Finnegan Jackson & Co sucked more salaries and fees out of the coffin.
I hope the investors are feeling better after this news and can now find out the true position which unfortunately will be that they will be lucky to get 30 cents in the dollar. They can now at least know it won't get any worse.
The directors may have to pack their sleeping bags for a long holiday soon - hopefully the facilities in one of the institutions will have sky TV for the rugby mad director or will the old boys network protect him??
Turning over some Queenstown schist would be very revealing.. assets owned by Christchurch property companies with American investors.. please ! Read ex and existing Strategic dirctors and shareholders. Go for it PWC.
Don't forget that Strategic's consultant slept in the same nest as that '80s finance company CEO who did porridge in the central North Island. Hard to imagine that the consultant didn't catch something !!
Why did HBOS stay for the whole journey with the Strategic directors and not cut them loose and try and turn this around with outside help. Maybe they are closer to the action than we think - or should i say their management were - and now must be worried when all is revealed.
I bet Lloyds Bank are not impressed
Here we again...ah! but have faith in the rulers our nation, we have the Commerce Commission, we have SFO, we have Jeff Meltzer of MMH (who has nothing to do with this case, I appreciate, BUT with Blue Chip) we have Minister Simon Power who is off to NYC to announce we should be proud of NZ history in Human Rights - sick to death with asses who continually reinvent themselves, screw investors, live the fat life and walk off to reinvent themselves, fraud? who wants to know? faith? honesty? Good luck to those investors, we are still waiting nearly three years down the track!
If John Key wants NZ to be a financial hub he needs to make sure he cleans up the local financial services industry and is seen to have a robust and regulated environment.
He needs to ensure that all crooks are given a holiday coutesy of the Government - and for the maximum time, so that we don't continually hav events like this happening.
Wake up John, wake up Simon Power and wake up Bill English.
Show NZ that you have the intestinal fortitude to make the tough calls instead of trying to be popular.
Re comment 2, Chris Lee is now acting as "poacher turned gamekeeper". Investors considering moratorium in Dec 2008 were not fully informed. Audited 2008 accounts supplied with moratorium documents did not disclose $68 million 2nd mortgages which were subordinated; actually 3rd ranking security. The $68m was shown under 2008 column in 2009 audited accounts.
The directors/shareholders of Strategic sold the business to failed Australian Private Equity company Allco a couple of years ago for many millions - the first 50% was paid in cash ( approx $100M ) and the second in a $12M cash payment and shares in Allco HIT the listed company on the ASX.
Surely the moralistic Kerry Finnegan who is trying to do the best for the investors ( not ) and his fellow cronie director/shareholders should now liquidate their assets that they purchased with this money and pay it back to the investors. Or PWC should spend considerable time assessing those transactions and the realistic value of teh comapny at that time which should by all accounts result in the directors being morally and ethically obliged to repay that money to the receiver for the benefit of the investors/debenture holders.
Let's see how serious Finnegan and co are about doing the best thing - but they should also save some for their legal fees that they will need to cover shortly.
Geez - John Key couldn't give a s**t about these investors - buyer beware and all that. Equally, while it true that mgmt and Dir's have finally stopped feeding from the trough, the Trustee and Recievers have shown they have no interest in pursuing past wrongs. All too hard for them. So at worst they may get charged with some thing and perhaps not be abel to act as Direcstors for awhile (maybe). But you all wait - in a few years they'll pop up again doing excatly the same thing and guess what - all those wonderful gullible investors will only too willingly hand over their money too them. Gotta love good ol NZ huh.
Do you all remember that Kerry got put on "Gardening Leave" from Hanover some years ago after Hanover suspeted that he had his hand in the till. They could not prove it so made him redundant. Stupid Hanover hired another into the same post a few months later so Kerry took Hanover for over $700k in a wrongful dismissal case. This info is in the public domain along with a copy of the Summary Judgement. He quickly spent his ill gotten gains on giving the shack in Kohi a spruce up. Of course the shack is owned by a third party (trust) so that is a good way to tuck things away so that nasty people can not get anything back
There is no way anyone will see any money back from these crooks and they all will pop up in the not too distant future doing the same stuff. They have to, who else would give them a job???
The investors should take a civil case against the directors/former directors and the consultant who basically ran the company.
Surely they can abandy together and also get a Solicitor/QC like Brian Henry ( who backs underdogs ) to take up the cause
Start with a case seeking the proceeds of the sale of their shares to Allco and then move on to individual dodgy deals that they personally benefitted from - or wait for a collection of those deals for one case.
Small investors go to the Small Claims tribunal and individually go them personally.
Make their lives as Hellish as possible.
The 13,000 investors have been too greedy to earn supposedly unbelievable return. Who is to be blamed?
The investors received the market rate for finance companies - such rates are meant to cover the risk involved - in this case the Strategic directors did not disclose the true risk and therefore the interest rates should have been higher.
The only greedy buggers here were the directors.
Well it didn't prove to be very strategic for investors like me did it? Basically, if any of the directors prove to have done dodgy deals they should be held accountable, but I for one just want the receivers to get on with sorting out the mess & getting us back as much of our money as possible so we can get on with life! Give them a chance to sort out what's left first & go after the past wrong doings after that. If we get more later as a result - great - but I'd like some clarity of how much I'm going to get from the money that's actually in the till first.
All comments about directors/management are OK. But step back and look at all the help Govt regulatory regimes are (NIL) and nine years of most left wing Government we will see in our lifetime (nil help). Also that it is PWC now going to drag out and milk the cow - any mention of hourly rates for the partners ? for this years graduates ? . The calls for legal action can be met by millions more of the funds going to PWC and lawyers - for a 3 month home detention ????. Accounting standards - IFRS - auditors - these were good (NOT). And we read article after politican that Mum and dad should not invest in a house......One can be certain all the house investors in say 2002 really regret not putting the funds in Strategic, Hanover, etc etc......
Wayne must be related to the Strategic Directors if he truly believes this trash.
Everyone agrees that a more regulated environment would have helped but it wasn't the reality at the time. To insinuate that one would have been better off in Strategic than investing in a residential property proves Wayne is on another planet.
Simple morals and ethics were entirely missing by the Strategic directors and consultant and in time we might find that they also breached legal boundaries - the receivers have already advised that they will investigate potential related party deals and pursue them.I think some of them will get more than home detention - more like a couple of years in a Government funded institution around Turangi.
AS far as PWC's fees go, they are worth every cent if they gain momentum in liquidating the loan book and maximising returns to investors.
Finnegan and his cronies spent something lie $7M on salaries for the year 08-09 which covered the period just before the moratorium and through to 30 June last year. He was on $10,000 a week. I have no problem with PWC's fees - well spent I say.
Generally agree with the statements, however one does have to wonder - was it a conflict of interest to have John Fisk as 'monitoring accountant' (no doubt on a decent fee) and now he is the receiver... (no doubt on a much more substantial fee)...
Certainly a conflict which he rightly flagged. Imagine though the cost(to investors) of having somebody new picking up the mess! BUT how about Finnegan raving about his appointment given the multiple conflicts that he, Fitzgerald and other have perpetrated !!!!
The only reason the rats had not departed this sinking ship was that related party deals were not yet two years old - this is a sure bet. Lets hope Fisk is good to his word in this regard.
This is all going to end up looking like a slightly modified Ponzi scheme that could only work in a property value growth bubble - then pop!
30 cents will end up looking like a great outcome - who wants a bet ?
Look at what Kerry wrote in Sept 2007. Who wnats to do the score card on his points below for SFL?
Pillock!
The non-banking financial services sector remains an important contributor to New Zealand’s economic activity. There is certainly a role for finance companies to deliver on good investment opportunities for investors.
Five things to look for in a finance company
• Know their lending criteria – ask questions like what and where do they lend to and how much have they written off in bad debts? How much lending is deemed related party lending.
• Strong liquidity – look for companies that ensure sufficient levels of cash stays with the business.
• Well-capitalised balance sheet – level of assets compared to liabilities. Look for a finance company that has cash flowing in more regularly than paid out?
• High gearing Ratio – the ratio of owners funds (shareholders) vs your funds (borrowed funds).
• Previous performance – good companies are run by experienced and highly skilled people and have a history of profitability.
You should always read the prospectus as well as the investment statement, it is most likely in the prospectus that you will find the information discussed above. And, when you cannot clearly find the information ring the finance company in question, they should always be able to answer your questions.
Please note Kerry Finnigan is the CEO of Strategic Finance Limited . This article is intended to focus on industry issues rather than the specific securities of any finance company.
Published 24th Sep 2007
Its absolutly extraordinary what these so called CEO's are being paid, especially when you consider they have been trading at the behest of investors kindness / stupidity under Moratorium. How is it that the CEO of Strategic and even worse the CEO David O'connell of Geneva Finance a tiny finance company with well under $100M of theoretical assets,, no doubt before further massive write-downs, also under moratorium are paid more than the Prime Minister ?
Part of any Moratorium proposal should be that management salaries being halved from their grossly outrageous levels, after all they were the idiots that created the mess, then they have the nerve to charge oputrageous salaries as though they are doing a brilliant job. Its nothing short of highway robbery.
Receivership is the correct way to go or alternativly perhaps a debt for equioty swap with South Canterbury Finance. At least Hubbard stood behind his company which is far more than any of the aforementioned clowns have ever done.
The reference to the two year time limit for related party transactions will also hopefully apply to HBOS/Lloyds arranging preferential security to Strategic's - the Strategic directors agreed to HBOS taking first raning security to improve their security position and Strategic then converted from first mortgage security to second mortgage security.
I trust Mr Fisk will also unwind these transactions.
The best thing that Fisk & McCloy can do is agree to the SCF deal providing that they can still investigate related party deals and the HBOS security swaps etc - hopefully that will produce more funds for the poor old investors. Maybe tehse guys could also sell their Herne Bay and Kohimarama multi million dollar homes and through that in the investor pool.
I agree there is minor conflict but not as much as if Korda Mentha were appointed as Graham Jackson is best mates with Grant Graham ( Korda Menta partner )
As these two firms are the only real receivers capable of such a big assignment, then Perpetual has made the correct choice.
You have to have experienced first-hand the arrogance of the SFL directors, consultant and management to understand why they've screamed aganinst receivership. They've been sticking it to everybody, and not just the investors, with arrogance, attrocious forecasting, inactivity with the book, unreal salaries, etc, etc. Put simply they've not lived in the real world for a very long time. Interesting to see what their CV's will say when they start filing into the job market.. well actually we don't need to guess.. more lies and mis-representations.
Let's hope the receiver and the authorities ensure that all they get is porridge inside for a few years as that is the only way these parasites will even start to learn what the real world is all about.
the creditors are entitled to their money, a receivership is a solution,but to radical. some solution were there. i can think at one right now: Online Forex Broker. it can offer online Forex trading, Commodity trading and CFDs and indices trading. from what i know the Forex Broker is one of the best of financial services industry. Strategic Finance could try it.
Receivership is the correct way to go or alternativly perhaps a debt for equioty swap with South Canterbury Finance. At least Hubbard stood behind his company which is far more than any of the aforementioned clowns have ever done ever
corporate recovery advice : Burton Sweet Corporate Recovery and Insolvency Practitioner.
When it comes to alternative issues, receivership is one of the best option. Though, pros and cons must still be identified so as to prevent any problem that may occur in the future.
every individual has their own choice of strategy when it comes to finance issues and concerns. Trying to understand this post, it shows that receivership may be one of the best option.
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