Another St Laurence fund faces liquidation
Yet another company in the St Laurence group, St Laurence Property Development Fund, is about to collapse with Perpetual Trust warning it will seek to appoint liquidators on June 30.
Monday, June 27th 2011, 7:14AM
by Jenny Ruth
Perpetual's proposed course of action is at odds with the wishes of the manager but Perpetual's head of corporate trusts, Matthew Lancaster, says St Laurence's proposals set out in a letter to investors signed by director Kevin Podmore "are either not possible or, in our view, are misrepresented by the letter."
Lancaster says the investors are owed $20 million in capital and more than $6 million in interest arrears - the fund hasn't paid any interest since March 2009 - and the one point both Perpetual and St Laurence agree on is it won't be able to repay this on the June 30 maturity date.
That default will trigger the appointment of liquidators.
"It is most regrettable that investors have been sent incorrect information, he says.
When the fund was launched in 2006, investors paid $4,500 per bond in a parcel which included 500 shares at $1 each which saw them own 50% of the fund's equity. They were promised a 15% annual return and their capital back on June 30 this year.
Podmore's letter says the fund has $750,000 in cash and isn't expecting to receive any return from its remaining investments, apartments in Brisbane and Mt Maunganui, before June 2012.
The letter, dated June 21, had proposed paying out $150 per bond on June 30, converting the remaining amount owing to equity, leaving investors owning 100% of the fund but still owed more than $7.3 million or $1,833 per bond in accrued interest.
Investors would then be asked to vote on "a compromise" involving them receiving just 0.1 cent in the dollar of the outstanding interest. Then they would be asked to vote on the appointment of a liquidator.
Podmore argues this would be more cost-effective than Perpetual appointing a liquidator. "In the directors' opinion, this would result in a higher cost governance structure as the trustee and a liquidator would be involved in the ongoing management of the fund.
"This course of action would most likely result in there being no partial redemption of bonds (on June 30) ... as the trustee, a liquidator and/or a receiver would most likely set aside the cash to meet their fees and costs," his letter said.
Podmore argues that, as the fund's effective owners and as the legal owners from June 30, "any decision to be made on the future of the fund should be made by the investors."
The fund's last annual report estimated investors might get between 55 cents and 65 cents in the dollar of their capital but this was "highly dependent on there continuing to be an orderly sell down of the unsold apartments at both projects at not overly discounted prices."
At the end of October last year, 94 of the 129 Brisbane apartments had been sold with 90 having been settled while 28 of the 65 Mt Mauganui apartments had been sold with 20 having been settled. Podmore's letter made no mention of any progress in the sales process.
The situation is reminiscent of what happened in April last year when Podmore attempted a similar last-minute scheme to save the main St Laurence finance company which went into receivership owing investors about $245 million. Another St Laurence company, Irongate Property which was also involved in the Brisbane apartments, went into receivership in May this year owing its investors $50 million.
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