Long hard slog to get Strategic cash back

Strategic Finance's receivers expect a long hard slog as they set about trying to recover as much of the $417 million owed to the finance company's 13,000 investors as possible.

Investors will have to wait six weeks to get an estimate of how much money they might get back, after earlier expecting to be repaid all their frozen cash, plus interest, over five years.

Strategic's trustee Perpetual Trust ran out of patience yesterday with the company's management, which had been trying to stitch together a deal, such as selling some assets, and pulled the plug.

Strategic's directors include Rugby Union chairman Jock Hobbs and former Countrywide Bank managing director David Wolfenden. Its chief executive, Kerry Finnigan, was on $10,000 a week salary.

Perpetual appointed PricewaterhouseCoopers partners John Fisk and Colin McCloy as receivers.

Mr Fisk said PwC would assess Strategic's loan book, now valued at about $220m, over the next few weeks and would aim to issue a report to investors and creditors within six weeks. This would provide an initial estimate of how much money might be recovered.

Strategic, which loaned money to property developers, froze repayments to investors in August 2008 as conditions in the property market worsened.

Investors then rubber-stamped a five-year moratorium proposal in December 2008, which was expected to result in all their money, plus interest, being repaid.

However, Strategic failed to make an initial $10.6m repayment to investors in January. That, in part triggered a "review event" under the trust deed.

Mr Fisk said it would not be easy recouping Strategic investors' money. Like fellow collapsed finance company Hanover, many of Strategic's loans to property developers were second ranking meaning there was a bank ahead of them in the queue to be repaid.

Matthew Lancaster, head of corporate trust at Perpetual Trust, said Strategic had been told a couple of weeks ago to provide its best alternative offer to receivership. It had come up with two options but the trustee felt receivership was a better option than either.

Mr Lancaster said the two offers were not unconditional, required a close look at the company books and would have involved investor meetings.

Any payment to investors would have been at least a couple of months away.

However, Mr Finnigan said he was "hugely disappointed" with the trustee's decision not to consider other options.

Proposals put forward involved swapping Strategic's debt for equity, along the lines of Allied Farmers' December deal to take on Hanover's loan book, and asset purchases.

"The trustee has chosen that receivership will deliver a better outcome. We are confused and disappointed with that decision."

- © Fairfax NZ News