Another finance company in receivership

Another Nelson finance company, with links to failed firm LDC Finance, has nosedived into receivership, owing $16 million to investors.

Long-established Tahunanui-based Finance and Investments was placed in receivership yesterday by its principals Andrew Harding and Murray Scholfield.

The move comes just a day after Nelson's LDC Finance went into receivership, owing $19.3 million to 995 investors.

Mr Harding and Mr Scholfield are also key owners of LDC, jointly holding 5.8 million of the 6.7 million shares in that company.

PricewaterhouseCoopers partners John Fisk and Malcolm Hollis have been appointed receivers of both businesses.

Mr Fisk said Finance and Investments had been reliant on funding from LDC, and with the receivership of LDC it could not obtain the funding it needed to meet its obligations or continue to trade.

It is the ninth New Zealand finance company to strike trouble in 16 months.

Finance and Investments had 370 investors who had invested $16 million with the company, and they were mainly made up of relations and friends of the business's two partners, Mr Fisk said.

While he did not yet know the value of the business's assets, he said it was likely to be less than what the investors were owed.

That meant investors might not get all their money back, he said.

Finance and Investments owed $1.25 million to LDC.

Finance and Investments began financing vehicles in 1973. Mr Harding and Mr Scholfield had spent all their working life in the motor trade and sales industry, according to the company's website.

The company was also a general financier, using people's vehicles and property for security.

Its website said that while Nelson-based, its services were available throughout the South Island.

It provided South Island dealers with hire purchase and stock-carrying finance.

Mr Fisk said Finance and Investments differed from the eight other finance firms that had faltered in the past 16 months, as it was classed as a partnership, rather than a company.

The receivers now had control of the business and would look at what to do with it. They planned to write to all investors.

One Nelson woman, who was an investor with both Finance and Investments and LDC, was today relieved she withdrew her money from both firms several months ago, after feeling uneasy about them.

The woman, who did not want to be named, said she withdrew almost $60,000 from Finance and Investments in April after tax was not shown on her statement, and she also withdrew her $230,000 investment with LDC six months ago after deciding she did not like what she had read in LDC's prospectus.

The prospectus, issued in April, raises concerns about the recoverability of $4 million worth of loans, and also acknowledges the company had made inadequate disclosures in financial statements to last September.

Companies Office records show that on March 31 last year LDC Finance amalgamated with another Nelson-based company, Eagle Finance Ltd.

All investors' funds have been frozen in the LDC receivership, although the company's directors expect they will be repaid to depositors and debenture holders in full.

Nelson financial planner Bill Dahlberg said today that the current situation with finance companies was likely to start putting pressure on smaller firms lending funds.

"I don't want to predict anything, and my group doesn't loan money into smaller finance companies - we don't recommend them, but what's really happening is that if investors take a panic attitude, then this could keep expanding, and we will see some well-run companies, through no fault of their own, come under severe pressure, which is happening now,'' Mr Dahlberg said.

He said for finance companies to offer high interest rates, they would rarely carry more than five to seven percent cash.

"The withdrawal of that cash is creating the liquidity problem."

- © Fairfax NZ News