LDC Finance unsecured debenture holders lose out
Unsecured debenture holders in LDC Finance, a Nelson-based finance company which collapsed in September 2007, will get nothing from the settlement of a bitter court case which has divided New Zealand's sunshine capital.
Instead, the entire settlement proceeds have gone to the secured debenture holders who have now been repaid all of the $12.3 million they were owed, plus a small amount of interest.
When LDC called in the receivers nearly six years ago, the unsecured debenture holders and call account holders were owed just over $9m.
LDC was the substantial loser in the settlement with the trustees for F&I Finance, another Nelson- based financier funded by mum and dad investors, securing $5.8m.
In a written statement, Grant Thornton, the new receiver of LDC Finance said: "The 468 secured investors of LDC Finance are to receive repayment in full of their capital investment plus a partial interest distribution, in total $4.9m."
The settlement came after a court fight between PWC, the former receivers of LDC, and F&I's trustees. That ended in a victory for F&I in the High Court last year, after which PWC resigned, citing conflict of interest.
PWC had been an adviser to LDC and F&I on a series of deals which had seen good loans from F&I swapped for ultimately worthless preference shares in LDC, and had briefly been receiver of both finance ventures.
At the time both LDC and F&I were struggling under the weight of poor lending decisions which had brought both to the verge of collapse.
Those loans-for-shares deals were central to the tug of war over the money, and the trustees of F&I successfully argued that money raised by F&I without a prospectus should have been held in trust and distributed to investors.