More Strategic woe

Strategic Finance says it is set to make a $98 million operating loss and is not going to have enough cash for some lenders.

Strategic froze repayments to 15,000 investors owed $325 million in August last year and won approval from them for a managed wind-down of its loan book as an alternative to receivership.

But while Strategic still believes there will be enough for total repayment of debenture holders, who voted for quarterly repayments of principal and interest through to December 2013, Strategic won't resume payment of dividends to perpetual preference shareholders "as full repayment of the prior ranking subordinated notes is now not expected".

"The board is currently of the view that interest on subordinated notes will not be paid and that approximately 85 cents in the dollar of principal will be repaid to this class during the moratorium," the company said in a statement.

"The total amount of principal owing to subordinated noteholders amounts to approximately $21m".

SFL expects to make a making a $98 million net operating loss after tax for the year to June 30 - leaving it with negative shareholder funds. Its net loss after tax for the half year ended December 31, 2008 was $32.76m.

The company said in a statement to the stock exchange that it expected to have negative shareholders' funds of approximately $25m in the accounts to June 30.

The finance company said that it was being hurt by the difficult economic climate and a number of other factors including the continued decline of property values, a high rate of defaults purchases involving on SFL mortgages, and actions that prior-ranking lenders are taking to collect their loans over properties on which SFL does not hold a first ranking mortgage.

"The board of SFL expects to make significantly higher levels of impairments, provisions and bad debt write-offs in respect of loans made by SFL," the company said.

It is about to be audited by KPMG (New Zealand), and warned the audit might lead to changes to the "impairment adjustments" in the June 2009 financial statements.

"It is the board's assessment that the provisional full year results have no impact on the forecast repayment of 100 cents in the dollar of principal and all interest to depositors, debentureholders or the prior-ranking BOS International (Australia) Ltd facility," directors said. But funds for perpetual preference shareholders would fall short.

Audited results for the financial year will be made available after the audit is completed in late August.

- NZPA