The existing government deposit guarantee scheme is due to expire in October this year, but finance companies with BB credit ratings or better are eligible to apply for an extension until the end of next year. Equitable is only the second to be granted an extension after Marac Finance.

Standard and Poor’s latest rating report on Equitable is available here.

Capital and Merchant was put into receivership in November 2007 owing 7,000 investors NZ$167 million. Receivers have said none of this will be recovered. See our DeepFreeze list here.

See the full Securities Commission statement below:

The Securities Commission has laid criminal charges and issued civil proceedings against Capital + Merchant Finance directors Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland. Criminal charges have also been laid against Wayne Douglas, who resigned as a director in February 2007.

These proceedings follow extensive investigations by the Commission since Capital + Merchant Finance went into receivership on 23 November 2007 owing approximately $167 million to some 7,000 investors. According to the receivers it is likely that none of this will be recovered.

“The Commission alleges that Capital + Merchant Finance’s offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party lending, insurance cover and liquidity,” Commission Chairman Jane Diplock says.

The Commission alleges that the directors made untrue statements in the registered prospectus and investment statement dated 15 August 2006, mainly in respect of related party lending and loan management. The Commission also alleges that the current four directors made similar untrue statements in the registered prospectus and investment statement dated 10 September 2007, as well as untrue statements about liquidity and cashflow and in the prospectus incorrectly stated that no loans were impaired and the company’s financial position had not materially and adversely changed since its last balance date.

In addition, the Commission alleges that five advertisements distributed during 2007 contained untrue statements about insurance cover for capital secured debenture stock and some of the matters referred to above. These claims do not apply to Mr Douglas who had resigned his directorship by then.

The Commission further alleges that Mr Nicholls and Mr Ryan knowingly misled the Commission.

Criminal charges

Most of the criminal charges are laid under section 58 of the Securities Act and carry a maximum penalty of five years imprisonment or fines of up to $300,000. Criminal charges are also laid against Mr Nicholls and Mr Ryan under section 59A of the Securities Act and carry a maximum fine of $300,000. The charges were filed at the District Court at Auckland on 18 December 2009. First Court appearances are scheduled for 8 April 2010.

Civil proceedings

The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors. Under the Securities Act these applications must be made together.

The Commission’s main purpose in making them is to take the first step towards compensation for investors who invested under the 10 September 2007 prospectus. A declaration of civil liability is conclusive evidence that can be relied upon by either the Commission or investors themselves in any subsequent claims against the directors for compensation. The Commission will consider pursuing compensation claims in due course should it be in the public interest to do so.

Investors can take their own civil compensation proceedings whether or not the Commission also has power to do so.

The civil proceedings are issued under section 55C and related sections of the Securities Act. They were filed on 30 November 2009 at the High Court at Auckland.

Other investigations

The Commission acknowledges the assistance of Grant Thornton, the Capital + Merchant Finance receivers, with this investigation.

As these proceedings are now before the Court it would not be appropriate for the Commission to comment further.

1. Easter meltdown? - Germany is now openly saying it wouldn’t mind if Greece applied to the IMF for a bailout, while Greece is saying it may have to apply for an IMF bailout as early as the Easter weekend. This could easily get very ugly very quickly. Hold onto your hats people. If this happens the Greeks will rightly ask if there’s much point in being in the Euro at all, as will the Germans. Who wants to bet on a broken euro by Christmas? Maybe not me yet, but we have a hairy few months ahead with the UK election in May too. Here’s the latest from the Wall St Journal.

Germany signaled it was open to supporting a joint bailout of Greece by European governments and the International Monetary Fund should the country need assistance, as Greece called on Europe for concrete help by next week.

Chancellor Angela Merkel is “open to a financial participation by the IMF” in any aid package for Greece, a senior German official said, while stressing that no final decision had been made. The official added that Greece hasn’t asked for a rescue and that Germany still wants Greece to solve its debt crisis alone through budget cuts.

The German finance ministry had raised objections to an IMF program for Greece as recently as last week.

Germany’s shifting stance sets the stage for a potential confrontation with other European countries at a summit meeting in Brussels next week. The comments come amid an increasingly contentious debate between Germany and its EU partners over how and when any rescue of Greece should occur. France and other members of the 16-nation euro zone have vociferously opposed a financial role for the IMF in Greece.

Greek Prime Minister George Papandreou said in Brussels on Thursday that he wants guarantees of financial support to come out of the summit, which is set for next Thursday and Friday. But European officials say privately that a decision on Greek aid may not be reached at next week’s EU summit, despite Greek pressure.

2. Trouble brewing – Ed Harrison at Credit Writedowns has a nice summary of the growing tensions in political systems globally after two years of the worst global recession since the end of WWII.

There is more than just a whiff of economic nationalism in the air. Is this not exactly the same spectacle we witnessed in the 1930s?

I see all of this as an inevitable consequence of the first truly synchronized global recession since the 1930s. After two plus years of economic stagnation, we’ve reached a point – everywhere it seems – where policy making is increasingly dominated by domestic political concerns. People are fed up with the status quo. They want no more economic pain. And they’re willing to throw the bums out unless this ends.

Politicians respond to this sort of thing. And it’s my feeling that this has led people to crawl back into their ideological positions and hold firm. This is what I see happening in Europe. This is what I see happening in the healthcare debate, on stimulus and on deficits in the U.S. and it is what I see happening in the U.S. – China debate as well.

3. What a lot of paper – This interactive chart from the Wall St Journal showing how much securitised mortgage debt is on the US Federal Reserve’s balance sheet is a cracker.

Now the Fed has stopped buying this junk many are worried US long term interest rates will rise. Some think domestic savers will step up to the plate to stop that happening. So far long term US rates haven’t picked up yet. We’ll see.

4. Nein…but softly – European nations are starting to get grumpy with Germany’s ‘cult of austerity’, the New York Times reports in this overview piece.

To protect the value of the euro, satisfy investors and appease Europe’s economic taskmaster, Germany, the region’s most heavily indebted nations consider that they have no choice but to slim down. Reviving economic growth and reducing unemployment must wait until countries put their fiscal houses in better order, the thinking goes.

But some argue that Berlin is pressing too hard, and that the region’s new fixation on debt has created a “cult of austerity” that could make it harder to recover from the slump. Drastic budget cuts, if carried out as promised, could set off deflation, send already high unemployment rates surging, bring governments down and even create popular opposition to the euro, critics say.

The pressure “will impose terrible strains on the government and society” for years to come, said Jean-Paul Fitoussi, professor of economics at the Institut d’Études Politiques in Paris. “It’s self-defeating, because if you have austerity and deflation in Greece, Portugal and Spain, then the European economy will not recover; firms will fail and jeopardize the banks.”

This is the key quote from German Chancellor Angela Merkel. This lady is not for turning. Good on her.

“The euro is facing the strongest challenge it has ever had to cope with,” ChancellorAngela Merkel told the lower house of the German Parliament on Wednesday. “A quick act of solidarity is definitely not the right answer. Rather, the right answer is to seize the problem at the roots; therefore there is no alternative to the Greek savings program.”

5. Axel Buffett – Warren Buffett is a funny old guy. Now he has appeared sporting an Axel Rose style haircut and bandana in an in-house rock video by staff at Geico, the insurer that is owned by Buffett’s company Berkshire Hathaway. This act of corporate leadership is right up there with Rob Fyfe appearing naked in the Air NZ videos. The best closeups are about 1 min 45 secs in. HT Dealbook

6. Trade war anyone? – Credit Suisse reckons China is closer to a trade war with the United States than at any time in the last 5 years, Bloomberg reports.

Five U.S. senators including Charles Schumer of New York and Lindsey Graham of South Carolina introduced legislation this week to make it easier for the U.S. to declare currency misalignments and take corrective action. Chinese Premier Wen Jiabao rebuffed calls on March 16 for an end to the currency link, saying he doesn’t think the currency is “undervalued.”

“In the near future, given the political tension between China and the U.S., it is unlikely that we will see much of an appreciation,” Tao told Bloomberg Television. “If the U.S. launches trade sanctions, China is likely to retaliate.”

The U.S. economy is in a “much worse” situation compared with five years ago and the Obama administration doesn’t have officials “who know China well” to influence decision-making, said Tao, a Hong Kong-based chief regional economist.

7. Just add capital – Former Federal Reserve Chairman Alan Greenspan reckons the best way to strengthen banking systems is for them to add 40% more capital, Bloomberg reports. Think about what that means. Banks will have to curtail lending growth and bank future profits rather than pay them out as dividends. They will struggle to raise fresh equity capital. This is all part of the de-leveraging story. 40% more capital is an awful lot of de-leveraging. American banks are already slashing lending to do this, despite all the money printed for them by the US Federal Reserve. This will happen globally too as regulators force banks to put aside more capital and leverage less.

“The most pressing reform that needs fixing in the aftermath of the crisis, in my judgment, is the level of regulatory risk-adjusted capital,” Greenspan said in a paper prepared for a Brookings Institution conference today. “Adequate capital eliminates the need for an unachievable specificity in regulatory fine-tuning.”

Banks may need to hold capital equal to 14 percent of their assets, compared with about 10 percent in mid-2007 before the financial crisis, Greenspan said. Lawmakers are considering an overhaul of banking regulation, including the biggest revamp of the central bank’s powers since its creation in 1913.

8. Don’t blame me – Meanwhile Alan Greenspan, who can shoulder a large chunk of blame for the debt-fueled global housing bubble because he ran interest rates too low for too long, reckons the fall of the Berlin Wall is to blame. Also in the Brookings paper, he says the entry of hundreds of millions of workers to the global marketplace pushed up savings in developing countries and this fueled easy lending… Sheesh. What a cop out. The Globe and Mail has the story.

The former Fed chief defended the central bank’s actions, saying that the seeds of the housing boom were sown by geopolitical events that were out of the Fed’s control, an argument he has presented a number of times in the past. The fall of the Soviet Union led to hundreds of millions of workers entering the global marketplace, he said in a paper to be presented to a Brookings Institution conference.

This new market-based workforce, Mr. Greenspan said, helped push up growth in the developing world. This in turn fueled a global savings glut that drove down long-term interest rates, leading to an “unsustainable boom” in house prices, he said.

That housing boom, Mr. Greenspan stressed, was not a phenomenon in the United States, alone with 20 other countries also witnessing huge run-ups in home values. While he acknowledged that markets and regulators misread the risk embedded in the complex financial products that triggered the crisis, he said no regulator can be expected to consistently forecast if a specific product will turn toxic.

9. Coal to fuel - Scientists in Texas say they’ve found a way to turn coal into gasoline for less than US$30 a barrel, The Globe and Mail reports. This could prove a godsend for all our coal reserves in Southland. Does this mean peak oil is not here yet…given the enormous supplies of coal out there. Australia, in particular, must be licking its lips.

Researchers at the University of Texas at Arlington (UTA) announced last month that they have developed a clean way to turn the cheapest kind of coal – lignite, common in Texas – into synthetic crude. “We go from that [lignite coal] to this really nice liquid,” Brian Dennis, a member of the research team, said in describing the synthetic crude that can be refined into gasoline.

Assuming that these Texas folk are correct, this advance in technology could represent a historic moment in energy production – for Canada as well as for the United States. Canada has huge reserves of lignite coal in Manitoba, Alberta and Saskatchewan (which already gets 70 per cent of its electricity from this common coal) – not to mention in Nova Scotia.

The Texas researchers, who worked on the project for about 18 months, expect the cost to drop further. “We’re improving the cost every day. We started off some time ago at an uneconomical $17,000 a barrel. Today, we’re at … $28.84 a barrel,” Rick Billo, UTA’s dean of engineering, told an Austin television reporter.

10. Totally irrelevant video – Germany v Greece. Topical. Karl Marx is coming off the bench. Socrates has scored! The Greeks are going mad… I’m a Monty Python fan… HT Ed Harrison

Pricewaterhousecoopers announced the receiverships and confirmed that BNZ was the bank. Patoka and McVitty Properties have 6 dairy farms, two grazing properties and two beef properties.

Maurice Noone later told Interest.co.nz McVitty was owned by Bob McVitty, while Patoka was controlled by McVitty. Noone said McVitty would not have any involvement in the business in the future.

PwC wanted to reassure staff it had no intention to launch any firesales or immediate cutbacks and would instead take a year or two to inject value back into the assets, some of which were farm conversions that had yet to be completed, Noone said.

McVitty was convicted in 2008 of obstructing a MAF inspector after an incident where McVitty shot a sick cow (pictured above). Here’s some details of the incident and McVitty’s use of a shotgun.

The first the investigator knew of McVitty’s presence was being approached directly by an angry farmer with a closed, loaded, single barrelled shotgun. McVitty’s silence made the investigator extremely anxious about his safety. McVitty then stormed directly past the investigator and in a deliberate and wilful act of rage shot the cow despite the investigator’s protestations. Defendant McVitty then stated “well it’s dead now. It’s all over and you can get off my property you’re trespassing”. He further stated that a vet was not welcome either.

McVitty also clashed in a FairGo programme with the widow of a murdered Onga Onga man after McVitty failed to pay a NZ$66,000 debt, Hawkes Bay Today reported. McVitty has also received infringement notices from the central North Island Horizons Regional Council over effluent discharges onto paddocks.

Here are the full statements below from PwC. I welcome any more detail informed readers might be able to provide in the comments.

PricewaterhouseCoopers partners Maurice Noone and John Fisk were appointed receivers of Patoka Dairies Limited on 16 March, 2010.

Mr Maurice Noone said the company appears to have over extended itself and has not be able to secure the necessary funding to complete certain development activities and to fund current operations and the projected debt levels. “As you can imagine, this is a last resort following extensive discussions between the parties, and is as a result of them failing to reach an acceptable position for each.”

“The initial priority is to work with key stakeholders to address financial and operational challenges. However, it should be noted that there is currently a plan for the completion of the development of these properties, and subject to our review of this, we will be working closely with the bank to secure the necessary funding to enable it to be implemented.”

Furthermore, Mr Noone states that “As receivers of Patoka Dairies Limited, we understand that such a situation can cause uncertainty, and accordingly we will work as quickly as possible to complete the restructure plan and to secure funding to complete the planned developments and to support ongoing operations. During this period we are adopting a “business as usual” approach and all employees will be retained whilst we work through and develop our strategy.”

In the meantime, Mr Noone urges all stakeholders and interested parties to be patient: “We will provide a report as soon as we possibly can but we recognise this will take some time. Anyone with concerns or queries should contact PricewaterhouseCoopers in the first instance.”

PricewaterhouseCoopers partners Maurice Noone and John Fisk were appointed receivers of McVitty Properties Limited on 18 March, 2010.

Mr Maurice Noone said the company appears to have over extended itself, and has not be able to secure the necessary funding to fund current operations and current debt levels. “As you can imagine, this is a last resort following extensive discussions between the parties, and is as a result of them failing to reach an acceptable position for each.”

“The initial priority is to work with key stakeholders to address financial and operational challenges. However, it should be noted that there is currently a preliminary plan for the restructure of the Company, and subject to our further review of this, we will be working closely with the bank to secure the necessary funding to enable it to be implemented.”

Furthermore, Mr Noone states that “As receivers of McVitty Properties Limited, we understand that such a situation can cause uncertainty, and accordingly we will work as quickly as possible to complete the restructure plan and to secure funding to complete this. During this period, we are adopting a “business as usual” approach and all employees will be retained whilst we work through and develop our strategy.”

In the meantime, Mr Noone urges all stakeholders and interested parties to be patient: “We will provide a report as soon as we possibly can but we recognise this will take some time. Anyone with concerns or queries should contact PricewaterhouseCoopers in the first instance.”

Actual net long term migration fell to 2,612 in February from 3,582 in February a year ago, while the trend measure of net migration fell to 1,480 in February from 1,600 in January. Net migration has been falling on a trend basis since it peaked at 1,980 in May last year as the number of New Zealanders leaving for Australia has picked up again in recent months and the number of foreigners migrating here has dipped.

Housing market watchers keep a close eye on net migration figures given its close connection to demand for housing, particularly in Auckland where many migrants arrive first. The turnaround in the net migration trend in late 2009 and early 2010 has combined with concerns about new property taxes in the May 20 budget and increases in interest rates to dampen activity and price growth in the housing markets through February and March.

Permanent long term (PLT) arrivals are down 3,600 from the month of February a year ago. However, departures of New Zealand citizens continued to decrease down, 600 compared with a year ago.

On a seasonly adjusted basis, permanent and long-term arrivals exceeded departures by 1,000 in the month of February 2010, down from 1,900 last month, Stats NZ figures show. A decrease in seasonally adjusted arrivals and an increase in departures are reasons for the lower net figure for February 2010, Stats NZ said.

Annual PLT net migration figures were up in the February 2010 year at 21,600 compared with 6,200 in the year ended February 2009. PLT departures were down 19,200 (23 percent) in the year to February 2010 from the February 2009 year. Over the same period, there were 84,800 PLT arrivals, down 3,800 (4 percent).

See the full release from Statistics NZ below:

This decrease in the net migration gain was mainly due to 1,200 fewer arrivals of non-New Zealand citizens, which included fewer arrivals on work and student permits (each down 400). At the same time, there were 400 more departures of non-New Zealand citizens.

However, departures of New Zealand citizens continued to decrease, down 600 compared with February 2009. This decrease included 400 fewer PLT departures to Australia.The annual net migration gain was 21,600 in the February 2010 year, up from 6,200 in the February 2009 year, but down from the 22,600 recorded in the January 2010 year. The January year figure was the highest net migration gain since the May 2004 year (24,000).

Net inflows of migrants in the February 2010 year were from the United Kingdom (8,600), India (5,700), China (3,600), and the Philippines (2,100). A net outflow of 15,400 people to Australia was recorded; well down from 34,400 in the February 2009 year and the lowest annual net outflow to Australia since the December 2004 year (14,700).

Visitor arrivals numbered 267,900 in February 2010, up 11,300 (4 percent) from February 2009. Most of the increase was from China (up 4,900 or 41 percent), Taiwan (up 2,300 or 188 percent), and Hong Kong (up 1,700 or 111 percent). This increase was largely due to Chinese New Year falling in February in 2010, but January in 2009.

This holiday period is a popular time for people from these countries to travel. In the February 2010 year, there were 2.482 million visitor arrivals, 57,200 (2 percent) more than in the February 2009 year (2.425 million) and similar to the year ended February 2008 (2.485 million).

Visitors from Australia were up 119,300 (12 percent) for the year, but this was partly offset by large decreases in visitors from Japan, Korea, the United Kingdom, and China. New Zealand residents departed on 104,000 short-term overseas trips in February 2010, up 7,300 (8 percent) from February 2009 but below the 07,900 trips in February 2008. For the February 2010 year, short-term departures of New Zealand residents numbered 1.927 million, down 22,500 (1 percent) from the previous year. This decrease included 13,200 (8 percent) fewer trips to Europe.

Comment from ASB Economist Jane Turner:
The slowing pace of migration comes as permanent departures have started to recover, rising 7.2% in February. This pick up has been underpinned by a recovery in departures to Australia, a trend we expect to continue over 2010. The Australian economy has fared comparatively well through the global downturn, managing to avoid recession. Employment growth there over the past 6 months has been robust, in contrast to rising unemployment in NZ.

Implications
We expect the pace of net migration to slow over 2010, and the recent pick up in departures to Australia confirm this trend is developing. The slower pace of net migration will remove some of the support to the housing market during the year.