Pyne Gould's Perpetual Trust has frozen its $56.2 million mortgage fund after a surge in investors seeking to pull their cash out amid increased scrutiny of the firm's related party loans.
Perpetual has put the fund in a moratorium where it will continue to accrue interest, but won't be able to accept new investments, nor pay withdrawals or distributions to unit-holdings, it said.
The firm took the move after receiving redemption applications worth some $6.1 million, or 11 per cent of the fund, since July 5.
"This development may be concerning to unit holders, but they need to be assured that we will be contacting them with more information as soon as possible," chief executive Patrick Middleton said. "This does not necessarily mean that the fund will close, or that the value of units will be affected."
Perpetual's funds have come under scrutiny after the Court of Appeal quashed a bid by Perpetual parent Pyne Gould to keep details of an investigation into related-party loans to George Kerr's Torchlight fund under wraps.
The Financial Markets Authority is looking into $28 million of loans from Perpetual's cash management fund to Torchlight Fund No 1 LP, a fund managed by Pyne Gould managing director George Kerr, after losing faith the debt would be repaid.
Since then, some $15 million has been repaid and Pyne Gould's Torchlight Securities sold down its holdings in lender Heartland New Zealand and rural services firm PGG Wrightson for $15.4 million.
Yesterday accountants WHK were appointed to oversee the management of two Perpetual funds.
The appointment was made in the High Court at Auckland just hours after Perpetual revealed it had put its mortgage fund into moratorium.
A second application by the funds' statutory manager, Trustees Executors, to freeze Perpetual's cash management fund was adjourned until next month.
In a letter to unit holders in the cash management fund, which extended the loan to Torchlight, Perpetual asked investors to consider whether they wanted to keep their investment or have it repaid.
The Pyne Gould unit disputes the FMA's interpretation of the loan, but has asked Torchlight to prepay the facility ahead of schedule, which it expects to be completed this month.
Perpetual said in a letter to unit holders that the frozen mortgage fund has only one loan, worth $1.2 million, in arrears by about $40,000.
The moratorium has been set to lift at the end of August.
Kerr became involved in Pyne Gould in 2009.
