Receivers brought in for Property Finance

Property Finance, the sixth finance company in 15 months to collapse, said today it had asked its trustee to appoint receivers.
Bruce McKay: Arm investors with information
Bruce Sheppard: Investors to blame for not assessing the risks

The company, which has debentures of over $80 million and loans of over $630m, reported on Friday it was in deep trouble and unlikely to be able to honour its debts.

Property Finance went into receivership after the group's trustee rejected a restructuring plan for the Christchurch loan group.

PFG managing director Darryl Queen said after talks, the trustee - Graham Miller of Auckland-based Covenant Trustee Com pany - had decided on the receivership in the interest of debenture holders.

PFG - which offers home and commercial loans - owes around $81 million to around 3000 secured debenture holders.

The company in receivership is Propertyfinance Securi ties - a wholly owned subsidiary of the NZAX listed group PFG.

PFG follows a series of finance company collapses, though the reasons behind its problems is separate to the others.

It had been affected by a fundamental change in credit markets flowing on from volatile international markets, and default problems in the US home loan market.

Last year Provincial Finance, Western Bay Finance and National Finance collapsed. The first two this year were Bridgecorp, owing investors about $500m, and Nathans Finance.

Queen said the board remained comfortable that the underlying qual ity of the company's assets should enable all debenture holders to be repaid in full.

"(But) notwithstand ing the merits of a restructure plan pro posed by the company to the trustee, the opinion of the trustee is that the appointment of a receiver is in the best interests of the debenture holders," the company said.

Property Finance's main bank is ANZ National.

Chairman Barney Sundstrum said the directors deeply regretted the need to request a receiver be appointed, but believed the NZAX-listed company had been "affected by a fundamental change in the credit markets nationally following the recent concerning trends in international markets".

Last week, Sundstrum said he was confident that the quality of the company's assets - mostly first mortgages on development properties and residences - would eventually see all debenture holders paid out in full.

Property Finance's trustee is Covenant Trustee and its auditor is Ernst & Young.

The company suspended trading in its shares on Friday and said it stopped taking deposits on Wednesday when it knew it had big problems.

Sundstrum said funds to second tier lenders had dried up while contagion from the "mess" on the international scene had affected the wholesale market.

Around 4000 investors have lent Property Finance, which trades under the name PropertyFinance Securities, $80m in debenture stock.

Sundstrum was not immediately available for comment today, but on Friday said: "We have no reason to believe debenture holders won't get paid back in full."

The previous Friday, Property Finance took apparently desperate action to raise capital, selling its 13.3 per cent stake in fellow NZAX-listed company CBS Canterbury for $5m and a 9 percent stake in NZAX-listed Loan and Building Society for $1.9m.

It had planned to marry the three companies, although the other two said they were not party to the plans.

Southern Cross Building Society bought the stakes, worth a combined $7 million.

Sundstrum denied the company knew it was in trouble when it sold the shares last week.

Property Finance, formerly Avon Investments, reported in its 2007 annual report it had loans receivable of $412.6m, and cash or cash equivalents on hand of $109.2m.

The accounts showed it had debt notes of $425.9m and debenture stock of $86.6m.

Property Finance's shares last traded at $1.10, having fallen from $1.38 in June. The company is capitalised at $15m.

Last week, Nathans Finance was put into receivership with 6000 investors owed $166m.