By Gareth Vaughan
Asset Finance, blocked from raising money from the public earlier this year by the Financial Markets Authority (FMA), says it's now planning to submit a new prospectus, with the raising of money through it crucial to secure the lender's future.
In its financial statements for the year to March 31, Asset Finance says that following the issuing of an FMA order preventing it from raising money from the public in April, its trustee Covenant Trustee Company decided to have aspects of its business independently reviewed at Asset Finance's cost. This review was in addition to the audit of Asset Finance's half-year and full-year financial statements by its auditor Grant Thornton.
"The Trustee's independent review has since completed and no material issues were found that were not already part of the standard audit. Asset Finance will be submitting a new Prospectus for registration upon
the completion of the audit of these financial statements, so the financial statements have been prepared on a going concern basis. Should Asset Finance not be able to register a new Prospectus, the going concern status of the Company would be in doubt," Asset Finance says.
The FMA slapped an interim order on Whakatane-based Asset Finance, which offers personal and business loans ranging from NZ$400 to NZ$400,000 plus factoring services, on April 13. Asset Finance founder and managing director Clive George told interest.co.nz in May the FMA's concern stemmed from a NZ$350,000 loan made by Asset Finance to Rexon Limited several years ago. Rexon was subsequently placed in liquidation in April 2009 at the petition of Steel & Tube Holdings with the Official Assignee appointed liquidator.
As of December 22 last year, Asset Finance said the net value of the loan was NZ$224,567. Although it wasn't earning any interest, regular payments were being made monthly to reduce the principal, with George telling the Sunday Star-Times the payer was a trust associated with him.
Meanwhile, an entity controlled by George that owns a 2005 Mercedes-Benz Atego custom built into a motor home, pledged this asset as security against the Rexon loan and one other one being a loan with a net value of NZ$1.055 million made to the owner of a catamaran offering scenic tours in the North Island. Asset Finance's new financial statements make no mention of the Rexon loan.
The FMA interim order, which left Asset Finance's lending unaffected, expired on May 4. However, an FMA spokeswoman told interest.co.nz at the time that the FMA was "working closely" with Asset Finance's trustee and, until its inquiries were complete, Asset Finance had agreed not to accept any further deposits or rollovers. When issuing the interim order it had said Asset Finance's offer documents were likely to be
misleading in a material way, something Asset Finance disagreed with.
Meanwhile, in its audit report in Asset Finance's annual financial statements - under the heading "Material Uncertainty" - Grant Thornton says: 'In forming our unqualified opinion we have considered the adequacy of the disclosures made in the financial statements concerning the Company's ability to continue as a going concern. The going concern status of the Company depends on the Company successfully registering a new prospectus. Should the company cease to be a going concern there would be material changes to the valuation of assets and liabilities presented in these financial statements."
Asset Finance had NZ$16.6 million worth of secured debenture stock on issue at March 31, down from NZ$17 million a year earlier, paying a weighted average interest rate of 10.63%. It also had NZ$791,087 worth of unsecured capital notes, down from NZ$1 million, paying a weighted average interest rate of 12.39%.
As for the company's financial results, they show a net loss after tax of NZ$215,503 for the year to March 31, versus a profit of NZ$599,423 the previous year. A NZ$251,957 dividend, equivalent to 4 cents a share, was paid to shareholders this year versus none last year. Total equity fell to NZ$2.8 million from NZ$3.3 million (total assets NZ$21.1 million versus total liabilities of NZ$18.3 million). Cash and cash equivalents up to NZ$4.2 million from NZ$3.5 million.
Net loans fell to NZ$14.9 million from NZ$16.9 million with impaired loans up to NZ$2.3 million from NZ$1.3 million. The weighted average interest rate for the firm's loans, which run for as long as five years, was 21.02% at March 31. Of the loans, 49% are secured by cars, 22% by second mortgages and 16% by first mortgages.
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