Strategic Finance's receivers say debenture investors will receive an interim distribution of between 1.5 cents and 2.5c in the dollar by September 3.

(Update adds further detail).

However, the sale of the failed property financier's loan book has been delayed and most of its loan valuations have fallen "significantly" in the past six months. The receivers won't provide any overall expected recovery range until the sales process is complete and say they can't say when the next distribution will be made to investors.

In their second letter to investors, out today, John Fisk and Colin McCloy of PricewaterhouseCoopers say the total amount of the interim distribution will be between NZ$5.5 million and NZ$9.2 million. The payout will be calculated on investors' secured debenture investment as at August 7, 2008.

A letter from trustee Perpetual Trust to each secured debenture investor confirming the exact amount of the interm distribution and the payment method, by direct credit or cheque, will be sent about a week before the payout.

Sale of the loan book, which consisted of 87 loans and had a total net book value of NZ$229.1 million at February 28, has been delayed due to the "complexity" of some of the exposures and the time taken to obtain valuations on the top 20 loans. Potential buyers wanted updated valuations, and one - of a large and complex commercial development - remains outstanding.

Furthermore in the majority of cases the updated valuations were at levels "significantly below" the net loan book value as at February 28.

"As you will appreciate, this has impacted on the level of the indicative offers from the interested parties," the receivers said.

Based on the expected timing of the receipt of the last valuation, Fisk and McCloy said they now expect to receive final bids for the loan book in September.

"Once the final bids are received, we will assess the final offers against the expected realisations in the loan book and make a decision on whether a sale of the loan book will proceed, or alternatively, whether the receivers will continue to recover the loans."

They said given the sales process was still ongoing, any announcement of a final expected recovery range for investors could impact on final bids for the loans. Therefore, no final recovery prediction would be made until the sales process was completed.

"Overall, achieving loan recoveries remains challenging due to market conditions and, in certain cases, enforcement action by prior ranking security holders has resulted in nominal or no recoveries," Fisk and McCloy added.

"It is difficult to provide guidance on when the next distribution will be made. However, we are committed to making distributions to secured debenture investors as funds become available."

Indicative bids for the loan book were received on June 14. "Certain parties" were invited to a second stage of bidding with these parties now undertaking further due diligence on the loan book.

Strategic froze repayments to investors in August 2008 blaming tough conditions in the property market. Investors then voted for a moratorium in December 2008 that aimed to repay them 100% of their principal investments plus interest through asset realisations over five years. At that time Strategic's loan book was valued at NZ$477 million.

However, Perpetual Trust called in the receivers in March, with about 13,000 investors owed about NZ$417 million, after Strategic failed to generate sufficient loan recoveries for a repayment to investors' that was due in January.

Based on discussions with the borrowers, legal advisers and specialist property advisers, PricewaterhouseCoopers was continuing to implement individual loan strategies, which should maximise returns to investors, said Fisk and McCloy.

About 58% of the net loan book as of February 28 was secured through second ranking mortgages over the underlying properties.

"In a number of those loans, Strategic Finance is heavily dependent upon the actions of prior ranking mortgagees as to what funds, if any, are available to Strategic," said Fisk and McCloy.

The receivers' said they expected to issue their next report by October 29, at which point they would be able to advise on the outcome of the sales process and said by then the nature and timing of further distributions would be clearer.

Strategic, which counted former All Blacks captain and New Zealand Rugby Union chairman Jock Hobbs among its directors, was involved in financing Auckland's Soho Square development, the Sentinel Tower project in Takapuna and the Fiji Hilton.

Most loans were on a capitalised interest basis, which meant interest accruing was added to the loan balance and received on repayment of the loan, rather than being paid to Strategic on a monthly or quarterly basis.

Strategic Finance's former chief executive, Kerry Finnigan, told interest.co.nz earlier this week management didn't believe it had done anything wrong during the company's demise.