The Bottom Line

Tim Hunter is the deputy editor of Fairfax's Auckland business bureau. He provides commentary and insight into the business issues of the day.

More questions than answers in Strategic saga

05:00am 09 May 2012 1 comment


Having followed the affairs of property lender Strategic Finance since before its collapse in mid-2008, I was interested in this story from The Press about how receivers are chasing two property developers for money.

It appears the two, Phil Burmester and David Pritchard, gave personal guarantees covering loans from Strategic Nominees for a development project at Matauri Bay in Northland called Cavalli Coastal Villas.

A High Court hearing in Wellington last month confirmed Burmester and Pritchard must pay $3.2 million each.

No doubt creditors of Strategic Nominees - who are not necessarily all debenture holders in Strategic Finance - will be pleased receivers are doing their best to recover money. But it is interesting to note that personal guarantees were apparently not always a requirement of Strategic loans.

Burmester was also involved in one of Strategic's biggest single loans in late 2008, after the company defaulted on its debts but before investors approved a moratorium deal that December.

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A dubious deal at NZF

05:00am 01 May 2012 5 comments

Here's some background into a current finance company dispute some readers might find of interest.

The story concerns failed finance company NZF Money, which collapsed last July owing debenture holders about $16.4 million.

The outlook for those investors is not rosy.

The company's receivers, Brendon Gibson and Grant Graham of Korda Mentha, are expecting they will recover between 25 and 42 per cent of the amounts they are owed, saying the company's loan book was ''significantly overvalued'' and ''contained a significant level of bad debts.''

They have also filed legal action alleging five directors of finance company NZF Money breached their fiduciary duties by selling an asset to the parent company for less than it was worth.

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Call and response

03:21pm 10 Apr 2012 1 comment


This story about the views of departing BP chief Mike McGuinness has a familiar ring.

"We've still got a bit of a profitability issue, where the returns aren't what the industry needs to encourage investment," he told the Dominion Post.

There had been a lack of infrastructure investment after years of poor returns, he said, although the situation was now improving.

He also said the price of fuel at the pump was seen by retailers as less important these days as companies focused on marketing methods such as loyalty programmes to attract sales.

"It may just be that the way people choose to entice customers across the forecourts has changed, rather than just to cut the prices across the whole of New Zealand," said McGuinness.

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Will Hotchin lose long-time legal eagle?

05:29pm 02 Apr 2012 5 comments


Hanover Finance director Mark Hotchin could find himself needing a new lawyer when the Financial Markets Authority lawsuit gets going.

Hotchin was known before Hanover's collapse for a multimillionaire lifestyle of mansions and luxury holidays. Of the six men lined up in the FMA's sights, probably only Eric Watson could outdo Hotchin for flashing the cash.

Hence, presumably, the reason his affairs were targeted by the FMA as it sought to freeze assets potentially of value in its civil claim.

Acting for Hotchin in that case was law firm Chapman Tripp, but there were hints of trouble ahead in a decision by Justice Helen Winkelmann in December.

In essence, Hotchin told the judge part of his defence to the FMA's claim would be reliance on legal advice provided to Hanover by Chapman Tripp, which helped prepare the prospectuses and investment statement. This raised the prospect of Chapman Tripp being required to give evidence in the case, which would prevent it acting for Hotchin.

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Up to their old tricks

05:00am 28 Mar 2012 3 comments


Just when you thought it was safe to get back in the water, up pops this little survey from Reuters suggesting stockbroking firms are returning to their old ways.

Of 120,029 analyst recommendations on 17,000 companies, just 9 per cent were 'sell', the survey found. That's down from about 20 per cent a decade ago, in the wake of regulatory efforts to limit the conflicts inside investment banking firms.

"While so-called 'Chinese walls' were set up after regulators and legal cases shed light on the role analysts and bankers played in inflating the 1990s technology bubble, research teams still appear conflicted between their conviction and their bank's client list," reported Reuters.

I'd be interested to see how research in New Zealand and Australia compares, because the same pressures would probably exist in local markets. Personally, I'd see only a fraction of the reports analysts provide their clients, but in my experience 'sell' notes have been rare.

This may not be a problem for institutional investors, who often see research from several different firms and are, we hope, sophisticated enough to form their own view, but mums and dads are usually tied to the advice of a single firm.

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