Orange Finance has announced that it has frozen debenture redemptions and stopped paying interest while its trustee decides whether to call in receivers, according to a report in the NZ Herald. This is the 44th finance industry failure in New Zealand during this credit crunch, and takes the total amount of investor funds affected to more than $6 billion, impacting more than 180,000 accountholders.
You can check out the list of all companies affected in our definitive deepfreeze list. Orange Finance is owned by Doug Somers-Edgar, the founder of the Money Managers organisation. The company stopped raising money in August, and did not renew its prospectus. Our earlier report is here. According to the latest accounts filed at the Companies Office, for 31 March 2008, Orange Finance owed more than $50 million to "secured debenture" investors. The NZ Herald story noted they are having difficulties collecting repayments on their portfolio of seventeen loans. Their March 2008 accounts noted "Loans are advanced on a first or second mortgage basis. In addition, in the majority of lending cases, the Company has taken a General Security Agreement and Guarantee against the borrowing entity, and has personal guarantees from the directors of the borrowing entity." Enforcing and collecting on these arrangements in a sinking property market may prove both difficult and take much time. In addition to Orange Finance, two other Money Manager-related businesses have also struck difficulties and closed - the First Step fund, and the Totara Mortgage Fund.