Bondholders to vote on rescue package
The 600 people who own bonds on the $8 million Ballantyne Property Bond will get to vote on a rescue package next week.
Monday, April 10th 2000, 12:00AM
The Ballantyne bond raised $8 million from the public in 1998 to fund the development of an 18-hole golf course and 150 unit residential development near Katikati, west of Tauranga.
The initial interest payments were made to bondholders, however the developers defaulted on the last payment in the middle of last year when they failed to secure sufficient pre-sales of sections at the development.
Since then the trustee, Tower Trust, has been working on finding a solution to the problem.
While a number of proposals have been floated the one that will be voted on next week has various stages and will take over a year to implement.
Under the proposal $250,000 will be paid to Tower after the bondholder meeting, and a further $7.25 million will be paid 90 days later. At that stage the developers want the security over the golf course released.
A final payment of $500,000 is scheduled to be made 12 months later.
Under this deal, assuming all three parts are satisfied, bondholders will have received their capital back plus their initial interest payments.
They will be out of pocket for the final interest payment and any penalty interest.
Tower estimates that currently more than $1.1 million in interest is owed to bondholders.
Money Managers marketing manager Al Scott says the package, while not perfect, is the best offer on the table.
He says the first two payments totalling $7.5 million are likely to be paid, however the final $500,000 isn't looking very secure.
The money for this final amount will have to come from profits generated over the next 12 months, and, going on past history, they aren't likely to be great.
An alternative to accepting the package is putting the business into receivership.
Tower Trust says a report from accountants Ferrier Hodgson says the proposal provides "a likelihood, but not a guarantee," that a substantial repayment will be made. Also, it says the payout is likely to be higher than if Tower had to enforce the mortgages and other charges.
Scott says it is unfortunate this issue ran into trouble, however he doesn't believe that there is anything wrong with property bonds.
He says bonds are only sold to people who are prepared to take on the inherent risk associated with the development. The high interest rates offered by the bond indicate the level of risk involved in the project, he says.
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