SCF loaned millions to Hyatt Hotel venture
South Canterbury Finance (SCF) poured $45 million in loans into Auckland's Hyatt Hotel in a complicated series of transactions.
However, its security ranked behind ASB, which was owed $25m, and Westpac, which was owed $2.5m.
The trial of two former SCF directors, Edward Sullivan and Robert White, and former chief executive Lachie McLeod, continued yesterday before Justice Paul Heath in the High Court at Timaru. The three face 18 charges laid by the Serious Fraud Office (SFO).
SCF came to have an interest in the Hyatt after its owners, which owed SCF money, ran into financial difficulties and SCF decided to buy it out.
The Regency Auckland company was set up and SCF loaned $23.5m to buy the hotel for $48m all up, with Sullivan and McLeod as directors.
In 2006 SCF attempted to sell the Hyatt Hotel to Auckland property developer Neville Mahon.
An advance was made of $25m from SCF to parent company Southbury, to be loaned to Mahon for the sale through the newly formed company Quadrant.
The sale never occurred. Quadrant remained the owner of the hotel with Sullivan's brother-in-law, Peter Symes, as sole director.
Written evidence from the now deceased Symes said he never realised he owned the hotel.
Former SCF commercial account manager Nigel Davenport yesterday detailed how loans were documented and managed.
Letters he wrote to auditors showed ASB held the first mortgage over the Hyatt of $25m, a second mortgage of $2.5m to Westpac and $39m was owned to SCF, ranked last. SCF then advanced a further $6.5m to refurbish the Hyatt.
Overall the Hyatt was valued at $56m to $72m, with $65.66m owed overall.
It was sold by the receivers to Accor in 2010.
Among other charges, each of the three defendants faces a charge of theft by a person in a special relationship in regards to their dealings in setting up Quadrant.
The Crown alleges Quadrant was a structure to hide a related party transaction, breaching the deed of the Crown deposit guarantee scheme.
The trial continues today.
The Timaru Herald