Crown guarantee scheme set to lose money on Vision Securities

Crown guarantee scheme set to lose money on Vision Securities

As Treasury starts repaying investors' in government guaranteed Vision Securities, the collapsed property financier's receiver is warning it will collect significantly less than is paid out to investors.

Treasury made its first payment to some Vision Securities investors' last week. The company was placed in receivership by trustee Perpetual Trust at its directors’ request after the failed settlement of a mortgaged property on March 26.

The settlement of that loan was expected to generate about NZ$6.75 million and its failure to do so led to concerns about the firm's liquidity and ability to meet payments to debenture holders. Deloitte's Rod Pardington and David Levin were appointed receivers on March 31. 

Their first receivers' report says 958 debenture holders were owed NZ$28.4 million. Unsecured creditors' were owed NZ$1.2 million. Vision Securities has 16 loans, the receivers say, mainly in subordinate positions in property developments at various stages of completion throughout New Zealand. Its assets are largely finance receivables secured by second mortgages.

Given the complexity of their review of the company's loan book, Pardington and Levin said expert advice had been sought from valuers and real estate agents. They were waiting for advice on some properties and at the time of the report were therefore unable to estimate the likely returns to secured or other creditors. They also note there could be a small number of investors' who don't have eligible claims under the Crown guarantee scheme. Receivership proceeds will be distributed to those investors and Treasury.

"Any distributions will be significantly less than the payments made to eligible investors under the Crown Retail Deposit Guarantee Scheme."

Meanwhile, a Vision Securities investor complained to interest.co.nz in April that Treasury's repayment process was slow, vague and frustrating.

Interest.co.nz's Deep Freeze list of finance company failures shows over NZ$6.6 billion has been frozen in almost 200,000 accounts since the crisis began in 2006.

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Chris,
Remember that Treasury does charge fees for companies who participate in the guarantee scheme. As of June 30, 2009 Treasury had received NZ$228 million in fees. So to provide some comfort, us taxpayers should still be ahead overall...