Investors to get power to put finance companies into receivership

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New regulations for moratorium proposals will give investors the power to vote for receivership if the offer does not proceed as expected.  

Monday, December 14th 2009, 11:28PM 1 Comment

by Paul McBeth

The government will require companies putting a moratorium deal to nvestors will also need to provide a tailored disclosure document to ensure investors receive independent advice, along with alternatives to the offer. Commerce Minister Simon Power earmarked the move in August this year saying the new rules will require clear and concise investment statements. If a proposal does not proceed as planned, secured investors will be able to vote for receivership.

"It is vitally important that investors understand moratorium proposals and compare them with the alternatives, such as receivership," Power said in a statement. "These regulations will ensure investors can consider the views of an independent export, the trustees and directors."

Moratorium proposals have been under scrutiny from regulators and policy-makers, with the Commerce Committee inquiry into the collapse of the finance company sector including aspects of the deals as part of its investigation, while the Securities Commission has been looking into ways to improve them. Securities Commission chair Jane Diplock told Parliamentarians in September that investors were unwilling to accept their losses and walk away from failed ventures, and moratoria were often the "slow death" of a company.

The announcement comes as Hanover Finance looks to exit its own moratorium arrangement by selling its loan book to Allied Farmers for some $400 million in an all-stock deal, while Strategic Finance announced it may have to delay its first repayment amid ongoing difficulties in the property sector.

Power said the new regulations will require companies already operating under a deferred repayment plan to report their progress to investors.

Paul is a staff writer for Good Returns based in Wellington.

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