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Receivers expect 'material' impairment on failed lender NZF Money's NZ$28.3 mln loan book; Debenture holders owed NZ$16.4 mln

Receivers expect 'material' impairment on failed lender NZF Money's NZ$28.3 mln loan book; Debenture holders owed NZ$16.4 mln

NZF Money's receivers say there's likely to be a "material" impairment on the property lender's loan book and they can't yet forecast the likely level of recovery from the loans that'll be available to repay the company's NZ$16.4 million worth of debentures.

In their first receiver's report KordaMentha's Grant Graham and Brendon Gibson say they are reviewing NZF Money's loan book and have started collecting outstanding loans. When they were appointed on July 22 the loan book stood at NZ$28.3 million before the deduction of bad debt provisions.

"At this time it is not possible to accurately forecast the level of recovery from the loan book assets," Graham and Gibson say.

"We note that several loans of significant size have already been subject to previous restructuring, and in many cases valuations for security properties are well out of date."

"These factors logically give rise to concerns that there will be a material level of impairment on the loan book," the receivers say.

NZF Money, a subsidiary of the sharemarket listed NZF Group which also owns 50% of Mike Pero Mortgage Holdings, was tipped into receivership in July by trustee Covenant Trustee Company due to an anticipated trust deed breach after NZF Group failed to secure needed short-term funding. This came after NZF Group had announced that NZF Money was "working through options" to address the impact of an expected NZ$3.5 million contract between one of its borrowers and a buyer not settling as expected.

The receivership also came after NZF Money was forced by the Financial Markets Authority, which raised concerns about NZF Money’s disclosures on asset quality and liquidity, to pull its prospectus meaning it could no longer raise money from the public.

Graham and Gibson say other assets to be realised include NZ$283,000 owed by NZF Group, a NZ$900,000 subordinated note owed by NZF Mortgages in its capacity as trustee of the NZF Mortgages Warehouse A Trust which is due to mature in September 2013, cash in the bank of NZ$428,000, and NZ$41,000 of fixed assets such as office furniture and computer equipment. Some NZ$33,000 of employee claims have been paid out with no claim yet received from the Inland Revenue Department.

Total unsecured creditor's claims are put at NZ$115,000 with Graham and Gibson predicting they won't get any of it back.

The receiver's report notes security interests registered over motor vehicles by Motor Trade Finances, Marac Finance, ANZ's UDC Finance, and Magnolia Lee Lease & Rentals. Graham and Gibson say NZF Money's directors, led by chief executive Mark Thornton, have co-operated with the receivers.

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Curious that there is a dispute over the ranking of debt owed to the Hillcrest Trust.

A quick Google search says that this is an O'Connor property vehicle - an interparty related loan in NZF. (the O'Connors are shareholders in NZF)

I wonder what else the receivers will unearth?


Hmm. I don't see it that way Ivan. I think investors will be concerned to learn that a number of valuations for properties that had been restructured were well out of date, and that there may have been a greater level of impairment than NZF let on.

It would be nice to think NZF could have traded their way out - they clearly weren't the basket case of fraud and wealth destruction that some finance companies were, but obviously more distressed than public statements (though the market must have been suspicious given their penny dreadful shareprice)

Here's food for thought - an Australian suitor was being bandied about by NZF as a solution to it's overall difficulties. Why didn't the Aussies buy? The obvious reason is that the impairment was greater than was publicly declared, which made them worry about buying in.



And a write-down for the parent:

"NZF Group announced today that it has written down the carrying value of the Group’s investment in NZF Money Limited (NZFML) to $nil and has discontinued including the results of NZFML in its consolidated financial statements with effect from 22 July 2011, being the date that NZFML was placed into receivership, as NZF no longer has direct control over NZFML’s affairs.

This follows the receipt of legal, tax and accounting advice and the release of the Receivers’ First Report dated 21 September 2011 by KordaMentha, Chartered Accountants, which indicated that there was unlikely to be a return to unsecured creditors of NZFML.

The effect of the above will result in an impairment loss on investments of $5.074 million being recognised by NZF in its individual parent company financial statements for the year ending 31 March 2012 and a loss on discontinued operations of $10.700 million being recognised by NZF in its consolidated financial statements for the year ending 31 March 2012.

NZF would like to reiterate that the receivership of NZFML has had minimal impact on the operation of NZF’s profitable Homeloans Division and on NZF’s 50% strategic investment in MPMH Limited (Mike Pero Mortgages).

A copy of the Receivers’ First Report dated 21 September 2011 released by KordaMentha, Chartered Accountants, can be viewed online at"