Dorchester investors cast a crucial vote

A group of anxious investors hit by the finance company collapses once again ended up in a Catch-22 situation.
About 1000 of them from the Bay invested $15 million in Dorchester Finance, and many of them attended a roadshow at the Matua bowling club on Saturday to hear details of the latest capital reconstruction plan which would breathe life back into the company.
They were promised back in July 2008, when the company suspended repayments, that they would get all their money back in quarterly payments over three years.
Dorchester Finance, a big sponsor of bowls who club members invested their savings out of loyalty, fared better than most finance companies - up to March 31 this year it repaid more than 50c in the dollar, totalling $88 million of the $164 million owing.
But the deferred repayment plan, or moratorium, came unstuck. Deja vu. The future again looked uncertain for the elderly investors.
They had the choice of accepting the capital reconstruction plan which should produce another 33c in the dollar - totalling 83c - within three years if everything went swimmingly.
Or they could vote against the plan and Dorchester Pacific, which no longer has any shareholder funds, would tumble into receivership.
The resulting sell-up would produce another 19c in the dollar for investors - a total of nearly 70c. Not a bad return, considering the circumstances.
In what has become part and parcel of these roadshows, Dorchester executive director Paul Byrnes apologised to the investors on Saturday - particularly since they haven't been paid any interest.
"The (deferred repayment) plan was halted by the landslide of crumbling property prices. I know you are feeling uncertain about the security of your investments," he said.
"Dorchester has not given up restoring your investments to the extent that it's possible. We can achieve this by implementing the (reconstruction) plan and returning the company to profitability."
Underpinning the new plan is a portfolio of hotels valued at $33 million and a commitment by two cornerstone shareholders, Hugh Green Investments and The Business Bakery, owned by former 42 Below chairman Grant Baker, who both hold a 20 per cent stake.
Mr Baker, who was also involved with Empower and eftpos company Netco, will take over as Dorchester's chairman in a reshaped board of directors.
The Dorchester directors will put the hotels - Emerald Gisborne, Goldridge Queenstown and One Riccarton Rd (formerly Parkview) Christchurch - into a separate property trust and debenture holders will be issued units.
The investors will, in fact, own the properties and Dorchester will sell them as quickly as possible. "It will not be a fire sale or receivership situation," said Mr Byrnes. "It could take two to three years to sell all the properties, but we hope to get the first one or two away within 12 to 15 months."
The debenture holders will also receive three-year notes bearing 5 per cent interest, and new, fully paid up shares worth 2.2c each. They also have the chance to buy options to new Dorchester Pacific shares in June 2013 at 12.5c a share.
The plan relies on Dorchester Pacific raising new capital of $10 million - 100 million shares at 10c each - and organising a revolving credit bank facility of up to $28 million.
The capital raising has been underwritten to the tune of $8 million by Hugh Green Investments and The Business Bakery.
Mr Byrnes told the investors in Tauranga that the company had trimmed its staff from 220 to 44, and Dorchester Pacific would return to "the simple" business of motor vehicle and consumer lending, and life insurance and savings.
With so many finance companies having fallen over, the path is clear for Dorchester to pitch for car loans, charging 15.5-16.5 per cent interest instead of the previous 22-23 per cent.
Mr Byrnes said there were risks associated with the reconstruction plan.
 Investors questioned him about the hotel properties and wondered whether the $33 million independent valuation was real.
Mr Byrnes couldn't answer one investor who asked for the rateable valuations of the properties.
Mr Byrnes said $70,000 had been spent on fixing leaky balconies at the Emerald Hotel in Gisborne, and all the properties were now running good occupancy rates.
Once again, time will tell how much the investors will get back. No doubt, the investors' votes passed the 75 per cent threshold at a special meeting in Auckland today for Dorchester to proceed with its reconstruction plan.