Another finance company collapses

Last updated 00:00 20/08/2007

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The Stock Exchange has suspended trading in VTL Group Limited shares, as its finance company has collapsed.

VTL Group, the parent company of Nathans Finance, has told the stock exchange it is insolvent.

The Securities Commission is investigating.

VTL directors were to meet the Companies Office today, the stock exchange said in a statement.

"NZXR will be seeking further information from the company to be released to the market," the exchange said.

Nathans Finance NZ Limited is a wholly-owned subsidiary of VTL.

On Saturday, the Registrar of Companies gave notice to Nathans that it was to:

not remove from New Zealand, transfer, charge, or otherwise deal with its property or funds without the approval of the registrar;

place in a trust account any money received for investment.

Nathans Finance, which has raised $150 million from debenture investors, lends the bulk of its debenture money to VTL, a franchiser of vending machines and related systems.

The most recent Nathans prospectus, to June 2006, showed loans to VTL of $79.6 million, all of which was due to be repaid by June 30.

Its prospectus noted that Nathans lent to VTL, and that VTL is was seeking to repay those loans.

"If VTL. . .is unable to repay this debt then. . .the company is likely to become insolvent itself."

The collapse of companies such as Bridgecorp had eroded public confidence in the finance industry, making it hard for them to attract money.

Directors of Nathans and VTL were to have "immediate" talks with Perpetual Trust Limited and Covenant Trustee Company Limited about bonds previously issued by VTL subsidiary, Chancery Finance Limited.

Nathans directors would immediately cease distribution of the company prospectus.

Chancery Finance Limited has previously ceased to issue bonds and does not currently have a prospectus on issue.

"The directors of VTL believe that as a result of the above, the transaction with Bacon Whitney Corporation previously disclosed to the market will not be able to proceed to shareholder approval," the statement said.

Issues have arisen concerning the financial viability of VTL, including a draft report prepared as part of the Registrar's investigation of VTL, which has just been received by VTL, it said.

Nathans directors felt the announcement about Nathans and the decision to withdraw its prospectus, would lead to a fundamental lack of confidence in the company.

In the current climate confidence would not be able to be recovered, the statement said.

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"The value of Nathans will thus be seriously impaired, resulting in VTL ceasing, in the directors' opinion, to be solvent. VTL will accordingly need to cease to trade."

- NZPA