Strategic Finance now unsure of first payment

• Tweet

Strategic Finance is talking down expectations that investors will receive their first repayment next month.

Monday, December 14th 2009, 11:09PM 2 Comments

In a letter to investors, chairman Denis Thom said it needs to compete several sales before everything shuts down for Christmas. If this dooesn't happen it is unlikely to have the cash to make the January 7 scheduled repayment.

Strategic may also have to boost its provisioning.

Thom said company's performance is "running behind that contained in our moratorium forecast" as the property market continues to deteriorate and credit lines remain tight.

The company will be able to make its first repayment to investors, provided "a number of specific loans which are currently being intensively work on" are completed, though Thom stressed that Strategic's ability to do so is "entirely based on loans being repaid over the next few weeks."

"We are not prepared to simply sell assets at any price to meet these targeted dates for repayment, as that is not consistent with our objective of achieving the highest recovery for investors," he said in his letter. "The board has also looked at current and future cash requirements of the business and believe that the cash retention amount of $10 million can be reduced to assist in allowing funds to flow to make the required payments."

Strategic froze repayments to some 15,000 investors owed about $325 million in August last year, before a majority of investors voted in favour of a moratorium in December. In August this year, the company posted a full-year loss of f$175.7 million after writing down $77.6 million of bad debt and increasing overall impairments to $146.5 million.

Thom said the board is reviewing its provisioning and will update investors on this "shortly" as asset values were difficult to assess and sales "continued to be delayed." Strategic's board is also concerned about the "higher incidence" of prior ranking mortgagees exercising their rights, which will force lower-ranked creditors to reassess provisioning.

Strategic Finance had written a number of second mortgages on resort, residential and commercial property developments in Auckland, Queenstown and Fiji during the market boom.

Comments from our readers

Commenting is closed