The heat goes on Pyne Gould Corporation

Pyne Gould Corporation has moved to full damage control mode as speculation swirls as to why its auditor quit suddenly yesterday.

PGC, which is 77% owned by a limited partnership between director George Kerr and US hedge fund Baker Street Capital, said yesterday that its auditor, KPMG, had resigned.

The reason given was “unresolved differences as to whether certain transactions should be disclosed as related party transactions, and concerns over the adequacy of governance and management of financial reporting.”

Mr Kerr and Baker Street gained control of PGC in March following a takeover offer of 37c a share, despite being well below the independent expert’s valuation of between 49 cents and 57 cents a share.

Yesterday, NBR ONLINE revealed the Financial Markets Authority (FMA) has been making enquiries over related party transactions involving PGC over the past two weeks.

NBR ONLINE also revealed a series of loans recently made by PGC’s Perpetual Trust funds to entities owned by Torchlight Fund No 1, which is also controlled by Mr Kerr.

Investors in the $150 million Torchlight Fund include Mr Kerr, PGC chairman Bryan Mogridge and South Canterbury Finance (in receivership).

Last year a mystery US investor bought a 27% stake in Torchlight (GP) 1, the general partner of Torchlight Fund No 1, forcing the fund to gain OIO approval for its land purchases in Queenstown and Wanaka.

The loans from funds administered by Perpetual Trust were issued just one week after Mr Kerr and Baker Street declared their takeover offer unconditional and shortly after independent director Bruce Irvine resigned.

Last week former PGC managing director John Duncan resigned suddenly.

Companies Office records show he is still a director of the two Torchlight companies that borrowed funds from Perpetual in February.

It is understood the NZX requires PGC to appoint at least one independent director to the board by the end of today.

Meanwhile, PGC’s purchase of shares in wannabe bank Heartland through another Torchlight vehicle is also under scrutiny.

In early March PGC lifted its stake in Heartland from 6.02% to 10.39%.

The transaction involved PGC-owned Torchlight Securities acquiring 17 million Heartland shares for $7.61m.

The transaction followed an earlier transfer of Heartland shares held by Mr Kerr’s private company Pyne Holdings, prompting speculation the deal was helping fund Mr Kerr’s own takeover of PGC.

However, this was strongly denied by PGC.

NBR understands separate complaints have been made to the FMA regarding these share purchases.