Company may clarify deals

17:00, May 02 2012

Embattled Pyne Gould Corporation may clarify some of the issues around claimed related party transactions today.

The company is expected to put out a statement on the NZX on some of the issues.

Investors in the Perpetual Mortgage Fund will be wanting clarification on whether money in that fund has been loaned to companies which another PGC business, Torchlight, has invested in and if so how much.

PGC's auditors, KPMG, and its managing director have quit in the past week and the Financial Markets Authority is inquiring into what PGC's former auditors have claimed are undisclosed related party transactions.

Documents from Terralink appear to show that Perpetual Trust, a subsidiary of PGC, has taken a mortgage security of $30 million plus 24 months of interest across properties in Wanaka and Queenstown owned by Real Estate Southern and by Henley Downs Village Investments.

The Companies Office website shows Real Estate Southern and Henley Downs are owned by a PGC company, Torchlight (GP) 1, run by PGC director and controlling shareholder George Kerr.


It appears Perpetual has taken over the mortgage security on Henley Downs from Australasian Credit Fund Ltd, which is another Torchlight-owned business.

The Terralink documents do not reveal how much Perpetual has lent to these companies, but show the amount of the mortgage security Perpetual has taken.

BusinessDay understands that Perpetual's mortgage fund may have lent to the two property owning companies but the amount is not known.

According to its website, Perpetual's mortgage fund invests in "high quality first mortgages" secured over residential, commercial and rural properties.

Its investors are what the industry terms "mums and dads" with a minimum investment of $1000 at $1 a unit.

The mortgage fund is managed by a PGC company, Perpetual Asset Management.

Its size was reported at $66.7 million in March and its loans are 73 per cent commercial and spread throughout New Zealand.

Perpetual mortgage fund's updated investment statement, dated February 10, shows some interesting changes.

It has introduced a new class of unit, B units that have to wait longer for redemption than A units, which are those bought before February 10.

The B units, those bought after February 10, may be frozen more readily than the historic A class units, one local financial planner advised after reading the prospectus.

If a unit holder or several want to withdraw more than 5per cent of the fund's units or a B unitholder wants to withdraw funds, the trustee, Perpetual Trustee, also owned by PGC, has the power to "stage" the redemption of the units over six months.

The trustee has the power to decide who of the B unit holders to redeem and does not have to be proportionate or consistent in doing that. The trustee can also decide if a B unit will not be that.

Unitholders of A units that reinvest the distribution each quarter in more units will be issued with A units and they will not be subject to the staged redemption that applies to B units, but that policy may change in the future, the investment statement says.