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90 seconds at 9am: Lombard and Nuplex directors accused; IMF and ADB warnings (Update 1)

90 seconds at 9am: Lombard and Nuplex directors accused; IMF and ADB warnings (Update 1)

Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news four directors in Lombard Finance have been charged with issuing a misleading prospectus. (Updated with response from Nuplex and director David Jackson resigning from the Securities Commission). The directors charged include chairman and former National cabinet minister Doug Graham and former Labour cabinet minister Bill Jeffries. Also, CEO Michael Reeves has been charged. He famously received a new sports car every year from the company for his troubles. All the directors deny the charges. Meanwhile, the Securities Commission was busy overnight. It has charged the directors in NZX listed chemicals firm Nuplex Industries with failing to properly disclose to the stock exchange that the company had breached a banking covenant. They face fines of up to NZ$1 mln each. Meanwhile, Commerce Minister Simon Power said Nuplex director David Jackson had resigned his directorship on the Securities Commission and Nuplex said in a statement to the NZX below it was disappointed by the charges and the directors would defend themselves vigorously.

The board of Nuplex Industries Limited is very disappointed that the New Zealand Securities Commission has decided to issue proceedings against the company and its directors in respect of the timing of Nuplex’s disclosure to the market early in 2009. This matter relates to disclosure in connection with discussions between the company and its banks to review one of its debt covenants. The company and its directors deny that there was any breach of continuous disclosure obligations and will defend themselves vigorously against the Commission’s allegations. The company’s negotiations with its banks were successful and led to them loosening the senior debt cover ratio (SDCR) following the company’s results announcement for the half year to 31 December 2008. The company takes seriously its continuous disclosure obligations and remains of the view that it has properly complied with them at all times. The company has cooperated fully with the Securities Commission, providing all relevant information and explanations in response to its questions, both in interviews and in writing. Regrettably, the Commission’s interpretation of the continuous disclosure required by the listing rules and the Securities Markets Act differs from the company’s directors’ considered judgement at the relevant time. Discussions took place with the company’s banks to loosen the SDCR covenant, effective as at 31 December 2008. These occurred as soon as the company had a clear understanding of the impact of the global financial crisis on demand and of the rapid devaluation of the New Zealand Dollar. The banks indicated they would consider loosening the covenant and, following completion of their internal processes, that is what they did. Given the banks’ positive attitude, and after consideration by all board members, the board made the judgement in January 2009 that there was nothing material to disclose beyond the disappointing half year financial information. Business conditions during the 2009 financial year were unprecedented across the world, and in January 2009 the company was in uncharted waters. The board exercised reasonable, commercial judgement on disclosing the successful SDCR negotiations with the banks in the interests of the company and its shareholders. The board’s view was, and remains, that while the company’s negotiations with the banks remained incomplete, the company was complying with NZX listing rules in not making a disclosure. Furthermore, the board believes that disclosure while the negotiations were confidential and incomplete could have prejudiced the company, its shareholders and the banks.
Also, the IMF has warned that all the money printing and low interest rates in recent years has created the risk a wall of cash will cascade into those stronger developed and developing economies as investors look for better returns. Meanwhile, the Asian Development Bank has warned that Asian economies need to raise their interest rates.

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