Power refers Strategic Finance to Securities Commission
Commerce Minister Simon Power has referred Strategic Finance to the Securities Commission after Act MP John Boscawen first raised concerns about the status of some of the failed finance company’s second mortgages.
Monday, March 29th 2010, 10:18PM
by Paul McBeth
A spokesman for the regulator confirmed Power referred the MP's concerns about Strategic but declined to comment on whether it was investigating whether the finance company had misrepresented the status of some of the firm's securities.
Boscawen told Parliament in December that Strategic's accounts showed some $68 million worth of debt had been classified as second mortgages when it was effectively a third-ranking security.
"When Strategic Finance-a company that went into receivership just 10 days ago-prepared its 2008 accounts, rather than showing mortgages that were in substance first, second, and third mortgages, it showed only first mortgages and second mortgages," Boscawen told Parliament in a speech to the first reading of the Securities Trustees and Statutory Supervisors Bill last week. "A year later, when Strategic Finance did its accounts to 30 June, they now showed, for the first time, what the company called a second mortgage with a subordinate position."
Boscawen told Parliament that in his view, the finance company's accounts for the year ended June 2008 were misleading, and that this in turn may have misled investors who voted in favour of the moratorium. He said the situation was not corrected until June 2009 statements were prepared.
He said he raised his concerns with Power, who told him the matter had been referred to the Securities Commission. A spokesman for Power said Boscawen's concerns had been passed on to the regulator, though the Minister was not expecting a report back as the matter was with the Commission now.
Earlier this month, Strategic was placed into receivership after it failed to convince trustee Perpetual Trust to approve a Hanover-style debt-for-equity swap. It had earlier breached its the terms of its moratorium arrangements by missing the first repayment to investors and falling below the required ratio of the value of its loan book to monies owed to debenture holders.
Receivers John Fisk and Colin McCloy of PricewaterhouseCoopers last week said there would not be any money to repay preference shareholders, and asked NZX to delist its securities.
Currently 10,000 debenture holders are owed $368 million, 1,000 noteholders are owed $22 million and 66 depositors are owed $1.5 million, according to the receivers.
Paul is a staff writer for Good Returns based in Wellington.
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