Marchmont keeps mum on identity; Stalls on Strategic queries

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UPDATED: Marchmont Securities Trust, which is offering investors in Strategic Finance as little as 10 cents in the dollar for the debenture stock, is refusing to divulge any details about itself and has stalled on answering questions about the offer.

Wednesday, January 27th 2010, 4:29PM 3 Comments

by Paul McBeth

Amy Hutton, a partner at RA Fraser & Associates which is acting for Marchmont, told Depositrates.co.nz that "the trustee requires that we keep his name and details of the trust confidential". Questions faxed to her office have been passed on to the trustee, she said.

Strategic, which is currently under review from its trustee after it twice breached the terms of its moratorium arrangement, apologised to investors for the Marchmont offer.

Marchmont is seeking Strategic debentures up to a face value of $5 million, and said the offer will be accepted on a "first come, first served" basis until the close of business on February 3.

Strategic chief executive Kerry Finnigan sent out a letter to investors apologising to them for "any distress or concern" the offer may have caused, but was advised that it was required by law to provide RA Fraser with a copy of its stock register when the agency requested it last October.

"The board of Strategic Finance wishes to make it very clear that it had no knowledge of such an offer and does not endorse or support it in any way," Finnigan said in his letter.

The information was provided "on the basis that it was not to be used to either solicit business, or to communicate with our clients in a manner which could give rise to a breach of the Privacy Act 1993".

Hutton said the offer was sent by the trust, and she could not answer whether Marchmont's letter contravened this assurance.

Strategic sparked a review event when it missed its first payment to debenture holders earlier this month, and prompted a second event when it increased its provisions and write-offs for bad debt to $106 million in the first half of the 2010 financial year.

The finance company, which owes investors some 15,000 investors about $325 million, sparked its first review event after it missed making its initial payment to debenture holders on January 7, though it was successful in repaying its $25 million facility with the Bank of Scotland.

Meanwhile the Securities Commission has put out a “warning” and said debenture-holders “should be wary” of the Marchmont offer.

It says when a finance company is in moratorium it is very difficult to accurately assess the value of the company’s debentures.

“The fact that someone is willing to pay 10c in the dollar does not mean that this is the true value of the securities,” commission chairman Jane Diplock says.

Strategic’s trustee, Perpetual Trust, says the offer “may seriously undervalue the amount that investors could otherwise receive from Strategic.”

“Perpetual considers that the Marchmont offer is likely to seriously undervalue the amount of each investor’s investment in Strategic,” its head of corporate trust business Matthew Lancaster says.

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

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