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Debenture investors owed $170 million by former TVNZ news sponsor Capital+Merchant Finance may get less than 10 per cent of their money back, and will get nothing until US company Fortress Credit Corp is repaid.
And the company's sell-off of some of its best assets in the months before it failed may have voided insurance cover on other loans, exacerbating investors losses.
Capital+Merchant was placed in receivership in November last year by Fortress which is owed about $70 million and has first claim over the company's assets.
Fortress called in receivers Grant Thornton while another firm, Korda Mentha, was called in to work for Capital+Merchant's other creditors including debenture investors.
Yesterday, Korda Mentha's Brendan Gibson said recoveries once Fortress had been paid out "might be as low as under 10 cents in the dollar".
Gibson said Grant Thornton had "only achieved a modest level of loan recoveries and asset realisations" and had been unable to repay Fortress.
Richard Simpson and Tim Downes of Grant Thornton had said C+M's secured investors could get 59 per cent of their money back.
Gibson said yesterday's news would be "very disappointing" to investors but it was important that they did not continue to have unrealistic expectations.
C+M's loans were primarily property related "and many of them are of questionable quality", he said.
"These matters, combined with the difficult economic climate in New Zealand, which is affecting liquidity and also property values, will result in significant losses being suffered on the majority of loans."
As well as turning to Fortress for costly funding last year, C+M tried to raise funds by packaging some of its best performing loans into securities and selling them.
But Gibson said it appeared that this securitisation programme might have voided insurance the company had over a substantial portion of its loan book.
Gibson indicated it was possible that C+M had continued to raise funds from investors via its "capital protected" product, after the insurance that provided that capital protection had been voided.
