Covenant Trustee Managing Director Graham Miller has announced the appointment of Grant Graham and Brendon Gibson from KordaMentha as receivers for Auckland-based property finance company Mutual Finance, which has a government guarantee up until early October.

(Updated with further detail from Covenant, comment from Treasury and Mutual Managing Director Paul Bublitz saying he was deeply disappointed with Covenant's move)

Miller said Mutual owed 340 depositors NZ$9.3 million and he understood the great majority of those were covered by the government guarantee.

"Covenant had formed the view that Mutual may have breached its minimum capital ratio, and as a result Covenant requested KordaMentha to undertake a review of the Mutual receivables ledger and its immediate cashflow leading up to the end of the Crown Guarantee period," Miller said in statement.

"Following receipt of that report and discussions with the company, Covenant decided it was in the best interests of stockholders for Mutual to be placed in receivership," he said.

Covenant said it had required all debenture applications to be placed in a solicitors trust account since May 14, when it began its review. It said these funds would be returned to the applicants.

Mutual Finance was run by former Strategic Finance founder Paul Bublitz, who is also involved with Hunter Capital, which was behind Viaduct Capital, which is also now in receivership. Strategic Finance is in receivership too.

Bublitz issued a statement saying the board was extremely disappointed with the actions taken by the trustee.

"The Board acknowledges that an issue had been raised with respect to a technical breach of one of the covenants contained within its trust deed," Bublitz said.

"The trustee also believed that a cash flow mismatch might arise through the timing of the realisation of assets and payments to depositors. The Company was working to address the technical breach and considers that the trustee has taken an extremely conservative view of the cash flows of the company," he said.

"The Company had been in discussions with the trustee on these matters, and was working with the trustee and its advisors to address the issue, which it viewed as capable of remedy in relatively short order. However, the trustee made the decision to appoint receivers before the Company had had any time to affect a remedy."

"The Board is deeply disappointed that it was not given the opportunity to resolve what it considers was an issue that was resolvable and considers that the trustee has acted in his own interests rather than those of the investors in placing the company into receivership. "

Bublitz said all depositors in Mutual Finance were covered by the Crown Guarantee and depositors should contact Korda Mentha or The Treasury./

This brings to 59 the number of finance companies, investment funds and mortgage trusts that have been frozen, closed, collapsed  put into receivership or liquidated since early 2006, according to the Deep Freeze list compiled by Interest.co.nz

This brings the number of investors affected to over 200,000 for the first time and takes the amounts frozen or lost to NZ$6.802 billion.

Earlier this week the government increased its provision for losses on the deposit guarantee scheme to NZ$934 million.

Treasury said all eligible Mutual Finance depositors would get the money they are entitled to under the Crown retail deposit guarantee scheme.

“We expect it could take 3 or 4 months to get necessary information about all depositors. When the receivers have provided the information to the Treasury, we will contact depositors and inform them about how to claim for repayment,”  Treasury Deputy Secretary of Financial Operations Philip Combes said.

“We are working to repay eligible depositors in a timely manner and ask depositors to be patient while we get information about who is owed money and how much each depositor is owed. The Crown stands fully behind its guarantee commitments, and we expect an orderly process of payment to eligible Mutual Finance depositors,” he said.

Treasury said around NZ$8 million of the NZ$9.3 million in deposits were guaranteed.