The receiver for Strategic Finance and Lombard Finance & Investments, PwC's John Fisk, is in talks to reach settlements with the directors of the two failed lenders in a bid to avoid the costs of taking legal action.
The Strategic and Lombard Finance boards have each received draft statements of claim against them by their respective receiver and both boards are in negotiations to reach an out-of-court settlement, according to Fisk's latest reports for the two companies.
Lombard Finance's directors, who are appealing a criminal conviction for signing off on a misleading prospectus, are alleged to have breached their duties under the Companies Act and have been in touch with the receiver since receiving the claim, the December 21 report said.
"We are continuing to explore whether there is any opportunity to achieve a negotiated settlement without incurring the substantial cost of court proceedings," Fisk said in his report on Lombard Finance. Similarly, the Strategic directors have engaged in talks on a without-prejudice basis with the receiver.
Both lenders have been the subject of regulatory probes, with convictions for Lombard Finance's Doug Graham, Lawrence Bryant, Bill Jefferies and Michael Reeves, and an ongoing investigation by the Financial Markets Authority into Strategic's board.
Fisk has been a go-to guy for an array of insolvencies, including the sale of the Pike River Coal mine to Solid Energy, the liquidation of the South Canterbury Finance group of companies and more recently overseeing the failure of fund manager Ross Asset Management.
Some 10,000 Strategic investors owed $367.8 million when the lender failed got a Christmas Eve distribution of 1.5 cents in the dollar, taking their return-to-date to 10 cents, and Fisk estimates they will get between 12 per cent and 20 per cent of their principal back.
The 4400 Lombard Finance investors owed $127 million at the time of the receivership have been repaid 13 cents in the dollar, and are looking at an estimated recovery of between 15 per cent and 20 per cent.
Fisk said the priorities for both receiverships in 2013 will be to realise remaining underlying property securing the lenders' loan books and to pursue claims against the directors and third parties.