The good, the bad and the ugly – NBR's plays of the week
Receivers do a good job
Insolvency practitioner Michael Stiassny of KordaMentha is seen by some as being a bit of a grim reaper, so the fact he used the word “delighted” in a report shouldn’t be taken lightly.
Mr Stiassny and his colleague Brendon Gibson used the word, which is rare in receivership reports, in relation to the sale of Cedenco Foods to Japanese company Imanaka.
They were appointed as receivers to Cedenco in November after concerns over governance issues.
This is often the case with receiverships, which are just as likely to be caused by poor management as they are to a result of sudden market changes.
Usually the best result investors can hope for from a receivership is that their losses are minimised.
So it is understandable that Messrs Stiassny and Gibson are so happy to have found a buyer willing to pay top dollar for Cedenco Foods and plans to keep its local operations in Gisborne and Hawke’s Bay.
Receivers often cop a lot of flak when the process doesn’t go well so they also deserve credit when they achieve success.
Hope for McKenna’s investors
Investors in Nigel McKenna’s Westin hotel will be hoping the KordMentha duo can work similar magic with Lighter Quay Hotel Management, the company responsible for paying Westin investors’ returns.
Messrs Stiassny and Gibson were appointed as receivers of the company after creditors voted against a repayment proposal Mr McKenna had put forward.
The company has been in trouble for a long time – NBR first broke the news Westin investors hadn’t been paid returns by Mr McKenna’s company in May last year.
One of the benefits receivers bring to the table is that they can take a calm, dispassionate look at the state of a company and give investors a more realistic idea of the situation.
In the case of the Westin, these investors seem to be victims of over-optimism, an affliction receivers can rarely be accused of.
Low ceiling for St Laurence returns
It may be more than what some investors in other failed finance companies will get back but St Laurence investors will hardly be overjoyed at the projected maximum return of 32c in the dollar.
They have already received 10c in the dollar before the company went into receivership and receivers Barry Jordan and David Vance of Deloitte have forecast another 15-22c will be paid out over the next 18 months.
Like all predictions of returns it is subject to a number of variables, not the least of which being the state of the property market.
The receivers are hardly suffering from delusions of grandeur (unlike many finance company bosses) but even if they don’t make wild assumptions about property values there’s always the chance the market will go off the cliff and returns will fall further.
However, a comment on the NBR website pointed out the projected St Laurence payout is probably a good result “considering what is in store with Strategic and what has happened to the poor Hanover investors now in Allied Finance.”
Guarantee not so guaranteed
And St Laurence investors are unlikely to get much extra from a $20 million guarantee provided by managing director Kevin Podmore.
The guarantee was provided by Mr Podmore and associated companies Auguste Finance, Neuhas Stonefields and Auguste Albany as part of the moratorium St Laurence entered into in late 2008 before it was eventually put in receivership on April 29 this year.
Under the guarantee $20 million would be paid 15 months after St Laurence went into receivership.
But there are concerns that the guarantors’ shareholder funds will not be nearly enough to cover the entire threshold.
Fortunately there’s still another year for the financial situation to improve but given current economic conditions investors shouldn’t get their hopes up.
May Wang’s not-so-generous offer
She may have increased her offer to investors in her creditors proposal from about 2.5c to 6c in the dollar but May Wang has failed to convince NBR online readers of the proposal’s merits.
A majority of creditors have accepted her proposal, which involves paying about $1.3 million to clear more than $22 million of debt and avoid bankruptcy.
The acceptance of the proposal, which is due to be heard in court next month, attracted disbelief and derision in comments on the NBR online story.
One commentator took issue with Ms Wang’s lawyer Paul Sills’ comment to the New Zealand Herald describing the outcome as “spectacular.”
“It probably is spectacular that a person can evade $21m of a $22m debt. It must be like winning Lotto and even more 'spectacular' that she didn’t randomly win the money; it was handed to her by those who have suffered financially due to her actions.
“Please see sense and bankrupt May Wang.”
Other issues involved
There are other issues tangled up in the proposal that make the situation even more complicated.
As NBR online reported this week, Ms Wang could pocket about $200 million if the Overseas Investment Office approves the sale of the Crafar portfolio of farms to her company UBNZ.
One has to wonder if the creditors would have been so eager to accept the proposal had they known about this.
After all, if the court accepts the proposal they will have no legal redress to get a slice of the payout if it does occur.
There is also the point raised in court by creditor Latitude Asia about the role of Dominion Finance, which is in receivership and voted for the proposal.
Receivers have a statutory duty to get the maximum return for company investors, meaning they may be more likely to accept creditors proposals rather than pushing for people to be bankrupted.
This can potentially allow a person to walk away from millions of dollars of debt and carry on as if nothing happened, which leaves other investors at risk.