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Geneva Finance fate put to vote today

Geneva Finance warns if shareholders don't approve an extended repayment plan today, the financier could slide into receivership. Shareholders will meet in Auckland this afternoon to vote on a proposal that will see them wait a further three years to

Georgina Bond
Mon, 29 Mar 2010

Geneva Finance warns if shareholders don’t approve an extended repayment plan today, the financier could slide into receivership.
 
Shareholders will meet in Auckland this afternoon to vote on a proposal that will see them wait a further three years to get their money back. This is to provide the financier’s wholesale lender Bank of Scotland International a five-year exit by 2015.
 
They have been warned if it’s not approved, Geneva is likely to
enter an immediate management wind down or have a receiver appointed.
 
Geneva Finance was the first finance company to freeze payments in November 2007, owing $142 million to 3000 investors.
 
What was initially a six-month moratorium was extended in July 2008 when it became partially listed on the NZAX.
 
Now, the board has asked smaller shareholders if it can push out the dates for full repayment from September 2012 to March 2015 for debenture holders and to April 2015 for noteholders.
 
This follows negotiations with Bank of Scotland which, earlier this year, advised Geneva it would not extend its loan facility of $35 million beyond the April 30 2011 maturity date. 
 
However, it has agreed to lend a reduced amount of $30 million through to 2015  and waive two breaches to its banking covenants – if debenture and noteholders approve the extension today.
 
In a letter to shareholders, Geneva Finance managing director David O’Connell said it was the board’s opinion that if the plan is not approved, the company is likely to enter into a management wind down or have a receiver appointed.
 
“Under either of these scenarios it is highly likely that the shares in
Geneva will be worthless, and there is the likelihood that debenture holders
and note holders will not receive all of their principal and or all their
interest.”
 
O’Connell said the extension would allow equity and debt markets to normalise and would see Geneva well positioned to take advantage of market opportunities in its sector.
 
Geneva’s lender’s rating was cut from CCC to CC by rating agency Standard & Poors following the extension with the Bank of Scotland.
 
The financier has repaid investors $65.4 million since 2007 and is one of the few finance companies in moratorium making monthly interest payments.
 
Debenture holders have been paid half of their $99 million principal investment owed when Geneva entered into moratorium, with interest of 14.5%.
 
Noteholders owed $11.5 million have not yet received principal payments but have been paid interest of 14.2% and are forecast to receive 85% of their money by the new April 2015 repayment date.
 
If the extended repayment plan is approved today, Geneva anticipates paying debenture and note holders another $4.6 million on Wednesday.

Investment bankers Northington Partners said the proposal was fair in its independent assessment of the report.

"One of the key potential advantages of the plan is that the company will remain as a going concern and that debentureholders will be in a position to extract additional value for their shares compared to the likely outcome under a wind-down scenario." 

Georgina Bond
Mon, 29 Mar 2010
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Geneva Finance fate put to vote today
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