Failed Strategic mulls buyout

 A HANOVER-STYLE asset sale may be among the options for failed property lender Strategic Finance after it missed a deadline to repay about $12 million to investors on Thursday.

The missed payment triggered a "review event" under a moratorium deal agreed with investors 13 months ago, and the company is now in talks with trustee Perpetual Trust, representing investors, about how to proceed.

Strategic CEO Kerry Finnigan said various options were on the table and two meetings had already been held with the trustee to discuss them.

"To give you chapter and verse on the various options is not appropriate at the moment," he said. But, "if there's somebody out there who wants to buy the loan book or if there's a restructure that could go on... there are plenty of opportunities that are being explored".

Asked if he had received any firm proposals to buy the loans, he said: "I'm not sure it's appropriate to be throwing that on the table at the moment."

Last month investors in Hanover Finance, whose $465m of funds were frozen in July 2008, agreed to swap their debentures and deposits for shares in listed company Allied Farmers. The innovative and controversial deal replaced a moratorium repayment schedule that drip-fed money back to investors over five years.

Strategic froze repayments to investors owed about $415m in August 2008, two weeks after Hanover, and has so far paid back just $25m of principal, plus interest of about $3m, to financier Bank of Scotland International, which had a prior claim to that amount.

Last Thursday's deadline would have marked the first payment to debenture holders for almost 18 months, but Finnigan said the payment milestone had become a hurdle to recovering money.

"... payment milestones are actually counterproductive to the ultimate objective which is to maximise returns to investors," he said. "We have seen that people are aware of the payment milestone that's due and, consequently, are trying to leverage off that position by trying to acquire assets of the firm below fair value.

"The board are of the view that we'd rather miss a payment milestone than sell an asset below what we consider to be fair value."

He said borrowers were also taking advantage of the situation.

"One thing that's overlooked in all of this is that we lent money to people who have failed to repay us, and they've been looking for every opportunity to avoid that obligation to repay. They're the bad buggers in this mix. If they'd met their obligation, we in turn would have been able to easily meet ours.

"I was receiving calls before Christmas from borrowers saying `we know we owe you $5m but we'll pay you $2m in full and final settlement because we know you've got a payment due on the 7th [of January] and you're not going to make it'.

"Those sort of conversations are not productive for anybody and if the trustee felt we were taking deals on that basis just to meet payments to investors they'd tip us out at a wink."

Asked which borrowers were guilty of such behaviour, Finnigan said: "The list is quite long."

Another option likely being considered by the trustee is receivership.

It's an option popular with investor John Lacey, owed $379,000 plus interest, who has been campaigning for more than a year to have receivers appointed.

"We don't want them [the management] in charge. We want an administrator or a receiver. All he [Finnigan] is wishing for is to keep his snout in the trough. They had to pay us the money on the 7th. And they didn't."

The moratorium terms allow for at least 14 days' grace before the trustee decides how to proceed. Finnigan said it was likely the process would take longer.

"The trustee wants the process to be done properly and, given the time of the year, neither they, nor us, have had the resources there to really get the discussions running at the level they should be.

"In terms of the longer term perspective we have to look at is the moratorium working, does it require change, and if so what change should be brought about."

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