Geneva investors approve new repayment plan
After being warned a "no" vote was like sending children to an abattoir, Geneva Finance investors have agreed to support an extended repayment plan.
The consumer finance company's investors today agreed to a scheme that will see them wait up to three years longer to get their capital back.
It was approved by 99 percent of debenture holders and 100 percent of note holders after the board warned Geneva was likely to be put into receivership if they didn't support the proposal.
Geneva Finance froze its payments in November 2007, owing $142 million to its 3000 investors, and investors agreed to a six month moratorium on capital payments. The moratorium was extended in July 2008.
Debenture holders had before today received 50 percent of their principal back but were asked to have the date for full repayment extended from September 2012 to April 2015.
Noteholders, who to date have received no principal payments, were asked to wait until April 2015 to get an expected 85 percent of their money back.
Both groups had received all interest payments throughout the moratorium.
The plan was hatched after Geneva reached a deal with the Bank of Scotland, which has been its main wholesale lender.
Bank of Scotland agreed to cut its lending facility from $35m to $30m and to be fully repaid in March 2015 with payments every six months.
The company has drawn $24m of that facility to date.
Geneva Finance chairman David Smale told today's meeting in Auckland that investors were like married parents who had a wide range of responsibilities.
"We've had offspring and it's a rather troubled child called Geneva Finance," he said. The company had responsibilities to the stock exchange, the Commerce Commission, Securities Commission, Shareholders Association and other entities.
Mr Smale said a yes vote would give investors a chance of a good return, while he gave a stark analogy in assessing the consequences of a no vote.
"A no vote is like sending your children to the abattoir, having them cut into little pieces and sold at the supermarket at a discount."
He said Geneva Finance had not missed any of its interest payments to either group of investors and had good prospects, albeit with some challenges.
About 70 people attended the meeting, much fewer than some previous extraordinary Geneva Finance meetings.
Only three people asked questions, with one, Northlander Ross Lockyer, questioning what chance a company with a CC minus Standard&Poor's rating had of attracting further debenture holder investment.
Mr Lockyer said Geneva had done better than most finance companies but questioned why people would invest in such ventures as the recession continued.
Geneva managing director David O'Connell said it was a fair question.
He said the company had planned for no debenture investment for a year but hoped it would be profitable in three years and then attract investment.