Capital + Merchant unlucky 13th as liquidity freezes
Capital + Merchant Finance, which yesterday became the 13th finance company to sink into receivership in less than two years, owed about $70 million to its US-based line of credit supplier Fortress Credit Corporation II, according to a report in the International Herald Tribune.
Thursday, November 29th 2007, 10:49PM
by David Chaplin
According to the just-released McDouall Stuart 'New Zealand Finance Companies Report, Capital + Merchant had issued a prior charge of $14.3 million on a credit facility supplied by Fortress Corporation.
"Despite ranking ahead of debentures, the Fortress facility had a weighted average effective interest rate of 13% at 31 March 2007, a full 350 basis points higher than that of debentures at 9.5%," the McDouall Stuart report says.
"Capital + Merchant has also undertaken a securitisation program by selling an undisclosed amount of loans secured by mortgages for $30 million, $21.9 million of which was used by 30 September 2007."
The group had a loan book, principally in the Auckland property sector, of around $200 million and owed 7,000 debenture-holders a total of approximately $190 million.
Grant Thornton said the current state of the finance company market had made it difficult for Capital + Merchant to attract new funds, which contributed to its collapse.
The receivers said it was unclear yet how much money it would be able to recover for debenture-holders.
In August, Owen Tallentire, Capital + Merchant chief executive, told ASSET New Zealand magazine the group was well-placed to weather the storm in the finance company sector following the collapse of Bridgecorp.
Tallentire said at the time that the firm's line of credit from Fortress should help it through any crisis.
"It will be very interesting to see what happens next... Bridgecorp is technically worse than [the collapse of} Provincial," he told ASSET in August.
Tallentire was unable to be contacted yesterday with all Capital + Merchant phone-lines apparently dead. Its website was also defunct.
However, Michelle Gilbert, general manager of Capital + Merchant associated company in Australia - Cymbis, told Good Returns it was unaffected by the collapse.
Gilbert said while Cymbis had adopted the Capital + Merchant business model and shared some executive staff, including Tallentire, it remained a separate legal entity and had no direct funding from the New Zealand finance company. "Obviously, we are all aware of the [Merchant + Capital collapse," Gilbert said.
Cymbis has raised some $170 million from Australian and New Zealand investors and recently launched a New Zealand operation.
According to the McDouall Stuart report, Capital + Merchant Finance is wholly-owned by the Capital + Merchant Group, "which is ultimately owned by Wayne Douglas and Neal Nicholls".
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