Mascot Finance today became the first finance company with the government's retail deposit guarantee to be placed in receivership.
That means the New Zealand taxpayer will have to pay up to cover the investors' losses.
Mascot has 2,558 debenture holders with NZ$70 million invested.
Treasury Secretary John Whitehead said that all eligible Mascot Finance depositors will get 100 per cent of the money they are entitled to under the Crown's guarantee.
Mascot's Trustee, Perpetual Trust said: "In continually reviewing impairments in the loan book the Board has concluded that a major loan is now unlikely to be recovered in full.
"A write down of that loan would result in a breach of the Company's trust deed. The Trustee and the Board of Directors of the Company concluded receivership was the best option to protect all investors and to ensure all investors are treated fairly."
"The deposit guarantee scheme was put in place to give New Zealand depositors confidence that their money would be secure in the event an approved financial institution failed," Whitehead said.
"The Crown stands behind the deposit guarantee scheme, and Mascot Finance depositors can be assured that they will get back all of the money they are entitled to under the guarantee," he said.
"The Treasury will aim to pay out guaranteed deposits as soon as is practically possible. Straightforward claims should be able to be paid out shortly after a claim is due and payable, but more complicated claims can be expected to take longer. We appreciate the cooperation and patience of affected depositors."
"While the Mascot Finance receivership is clearly of concern to those involved, New Zealand's financial sector remains sound, and people can continue to have confidence in it."
Deposits covered by the guarantee include the principal sum deposited, along with interest accruing in accordance with the terms of the deposit up to $1 million per depositor, per institution. Deposits made and interest earned both before and after Mascot Finance's approval are covered, Treasury said in a statement.
Deloitte partners, Brett Chambers and Paul Munro will be Mascot's receivers.
- INTEREST.CO.NZ
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