Trustee Perpetual Trust says it has appointed Deloitte as receiver to Finance and Leasing Ltd at the request of the Christchurch-based finance company's directors.
Matthew Lancaster, Perpetual Trust's head of corporate trust, said Finance and Leasing has 227 debenture holders with NZ$17 million invested. The company isn't a participant in the Crown retail deposit guarantee scheme.
Deloitte's Brett Chambers and Paul Munro have been appointed receivers, have started their assessment and would endeavour to report to debenture holders as soon as possible, Lancaster said.
The receivership had come about because Finance and Leasing, which lent money for property development and asset acquisition and retention, had breached its capital ratio covenant required by Reserve Bank regulations for finance companies.
“While the capital ratio requirement, which came into force on December 1, 2010, was advised some time ago, Finance and Leasing has been unable to re-gear its balance sheet sufficiently in the time available to meet the covenant on a consistent basis," said Lancaster.
"The company has applied to the Reserve Bank for dispensation but that would have taken three months to process, and in the meantime the Companies Office was unwilling to approve the company’s prospectus."
Without a registered prospectus, Finance and Leasing would've been unable to trade as a finance company and therefore had no option other than receivership.
Lancaster added that the receivers needed to make their assessment of the state of the company’s assets and liabilities before any estimate of return of investors’ money could be made.
Chartered accountant Kipp Alexander founded Finance and Leasing in 1980 and is its executive director. The other director is another accountant, Graeme Marriott.
Finance and Leasing's latest prospectus notes that as of June 30 last year 77% of the firm's total receivables, or 10 loans, were subject to interest capitalisation. This means interest accruing was added to the loan balance and received on repayment of the loan, rather than being paid on a monthly or quarterly basis.
Finance and Leasing lost NZ$387,606 in the year to March 2010, down from a loss of NZ$417,975 the previous year. In the three months to June 2010 its reinvestment rate by value for debenture stock and unsecured deposits was 70.92%. For July it was 76.56% and August 72.84%.
(Update adds more detail).