Perpetual Trust refuses 'public debate' with Podmore over St Laurence receivership (Update 2)
By Gareth Vaughan
St Laurence's trustee says it won't enter a public debate with the finance company's managing director Kevin Podmore over its decision to call in receivers.
(Updated with St Laurence's 'extremely disappointed' reaction and call for a shareholders' meeting to overturn Perpetual's decision, Perpetual's refusal to enter a debate, and corrects name of Deloitte's partner.)
However, Perpetual Trust's head of corporate trust Matthew Lancaster told interest.co.nz it was possible that investors holding 10% of St Laurence's debenture stock could force a special meeting to try and overturn the trustee's decision.
"We will work through this if it occurs but have no indication as to whether it is on the cards," Lancaster said.
Perpetual Trust appointed Deloitte's Barry
Jordan and David Vance as receivers on Thursday a day after St Laurence issued a press release and sent a letter, without its trustee's approval, to investors promoting a debt for equity swap in an attempt to prevent receivership.
In a short statement issued on Friday, Perpetual Trust said it was aware of comments by Podmore criticising its decision to call in receivers and saying investors have the right to call a meeting to try and change the trustee’s decision.
"Perpetual Trust will not enter into a public debate with Mr Podmore around this matter. In our statement yesterday we provided an explanation for the receivership. As trustees we have been appointed to act in the interests of investors and we believe receivership best serves those interests."
"We are reassured by Mr Podmore’s statement that St Laurence will cooperate with the receivers," Perpetual Trust added.
On Thursday Lancaster said receivership meant a person independent of the current management and directors would oversee the orderly realisation of St Laurene's assets on behalf of St Laurence's 9000 investors who are owed NZ$245 million.
Perpetual said St Laurence had breached its trust deed by sending its letter to investors without approval.
"We had expressly stated in a conversation with the managing director Mr Podmore that it should not be sent," Lancaster said. "There were a number of reasons for this, principally that the information contained in it was selective, and potentially misleading as a result."
St Laurence issued a statement on Friday morning saying it was "extremely disappointed' and that it wanted an investors'' meeting to overturn Perpetual's decision.
“We are extremely disappointed that the Trustee has deprived investors of the opportunity to decide themselves on whether our proposed debt for equity swap plan is in their best interest," Podmore said in the statement. "The letter we sent to investors yesterday was neither misleading nor did it require Trustee approval. The Trustee should not suggest otherwise," he said.
Read Perpetual's full statement below
Perpetual Trust today appointed Messrs Barry Jordan and David Vance of Deloitte as receivers of St Laurence to protect the interests of 9,000 investors who are owed $245 million.
Investors voted in December 2008 for a moratorium which gave the company until 2013 to pay back much of the monies owed to investors. The balance owed to investors might not have been paid until 2021 in some cases, and 2034 in others. To date St Laurence has paid $10 million to investors but recently the company has indicated that it would soon become insolvent.
“The insolvency of St Laurence creates an Event of Review of the Trust Deed between the company and investors. Perpetual Trust, as the trustee, has been considering the options. In our view, the appointment of a receiver answering to the trustee and investors will provide more certainty than any other proposal,” said Matthew Lancaster, Head of Corporate Trust for Perpetual Trust.
“In appointing receivers today we are ensuring that a person independent of the current management and directors will oversee the orderly realisation of assets on behalf of investors. We are also ensuring that the personal guarantees provided by the Corporate Guarantors and Mr Podmore remain in place rather than being released as they would have been under St Laurence’s proposal. This may provide some additional protection for investors, and we feel that the Guarantors owe it to investors to permit their ability to honour the guarantees they gave them to be tested in the normal way.
“Importantly, we have ensured that the management companies which have management contracts for the National Property Trust and Irongate Property Limited have been kept out of receivership. This will avoid any adverse effect on the continued operation of those contracts.
“The letter to investors that St Laurence released yesterday was without the required authorisation of the trustee. We had expressly stated in a conversation with the managing director Mr Podmore that it should not be sent. There were a number of reasons for this, principally that the information contained in it was selective, and potentially misleading as a result.
“Under the debt for equity swap which relocated investors into a new company the existing management would have remained in place, and in that and other respects St Laurence’s proposal provided no certainty that the very disappointing performance of the company in the recent past would improve. The new company would still need to borrow in order to trade which would further dilute value for existing investors. After all, St Laurence is insolvent. The proposed debt to equity swap in itself does not solve this; it is simply a device to give management another chance, and to do so free from trustee supervision.
”In addition, there is no certainty that there would be a market for the shares that would be issued to investors – there is just further uncertainty around whether, or when, investors might receive further payments.
“None of these aspects of the proposal were satisfactory to us.
“It is important to explain that the company has not been fully open with the trustee in the manner in which they have acted. In addition to sending an investor update letter with the company’s own proposals that was not approved by the Trustee, they have also not been able to provide the Trustee with the McGrath Nicol report they commissioned, nor of any report from Grant Samuel despite referring publicly to each yesterday, and also they have not provided proper up to date information on the present value of the assets of the guarantors.
“This is a very clear case where the interests of stockholders will be served by removing the current directors and management from the process of recovering monies for investors,” said Mr Lancaster.
The receivers have taken control of the company and its assets today, and will begin preparing a report for investors and the Trustee which is expected within six to eight weeks.
Read St Laurence's full statement below:
The board of St Laurence Limited (SLL) is disappointed that the Trustee, Perpetual Trust, has appointed a Receiver to the company and some of its subsidiaries. The Trustee has substituted its view for those of the investors in respect of the investors’ own money.
SLL Director, Kevin Podmore says, “Perpetual has declined to give us reasons for its decision and did not consult with us as to the likely value outcomes for investors before making it.
“We are extremely disappointed that the Trustee has deprived investors of the opportunity to decide themselves on whether our proposed debt for equity swap plan is in their best interest. The letter we sent to investors yesterday was neither misleading nor did it require Trustee approval. The Trustee should not suggest otherwise.
The Directors remain of the opinion that the plan we intended to put to investors in June would provide a significantly better overall result for investors than a receivership. Investors still have the right in a meeting to change the Trustee’s decision if investors consider that appropriate.
We will of course cooperate with the receiver because our commitment remains, as always, to maximise investors’ recovery,” Mr Podmore says.
The receivership does not include the companies which are the managers of The National Property Trust, Irongate Property Limited and its proportionate ownership schemes and syndicates.