The receivers of Strategic Finance Ltd said offers they received for the failed finance company's loan book were well below their lowest estimate.The loan book consists of 87 loans, and it had a total net book value of $229.1 million as at February 28. Re
The receivers of Strategic Finance Ltd said offers they received for the failed finance company's loan book were well below their lowest estimate.
The loan book consists of 87 loans, and it had a total net book value of $229.1 million as at February 28. Receivers John Fisk and Colin McCloy of PricewaterhouseCoopers have decided to continue to realise the loan book themselves.
The bidders cited the high proportion of second mortgages in the loan book as a reason for their low offers, PricewaterhouseCoopers said.
Approximately 58 percent, or $131.4 million of the net loan book as at February 28, is secured by way of a second mortgage over the underlying property.
Bidders also cited the threat of enforcement action by prior-ranking mortgagees, uncertainty regarding the level of recovery and complexities of loan participation arrangements.
Because of the considerable uncertainty, the receivers are estimating gross recoveries to the secured debenture investors from the loan book, prior to costs, in a wide range between 12 percent and 35 percent.
"The property market continues to be challenging and volatile, particularly in respect of development land and bare land subdivisions -- both of which are prevalent in the Strategic Finance loan book," the receivers said in a report.
Of Strategic Finance's 87 loans, approximately 25 of the borrowers are either in liquidation, receivership, or the property owned by the borrower is being, or has been sold, by the first mortgagee exercising its power of sale.
Between March 12 and October 1 about $42 million had been recovered from the loan book but only $5.4 million came to Strategic Finance, with the balance going to prior-ranking creditors and to cover sale costs.
The receiver is investigating a number of matters raised by investors and other parties in respect of activities of the group of companies before the receivership.
Strategic froze repayments to investors in August 2008, and investors voted for a moratorium in December 2008 that aimed to repay their principal plus interest over five years. At that time Strategic's loan book was valued at $477 million.
Liquidators were appointed to Strategic Finance on July 26 to preserve certain potential claims that are available to liquidators and not to receivers.
Former All Black captain Jock Hobbs is a director and former chief executive of Strategic Finance.
