KEY POINTS:
The finance company carnage continued today with Nelson-based LDC Finance Ltd being placed in receivership by its trustee, owing 1000 investors almost $20 million.
Perpetual Trust said it had appointed Malcolm Hollis and John Fisk of PricewaterhouseCoopers as receivers on the request of the company's directors.
It is
the eighth finance company to go bust since National Finance 2000 in May last year.
LDC's directors said the receivership was not the result of asset quality issues, but "because of serious concerns as to the state of the debenture and funding markets and the ability of the Company to obtain new funds and retain existing investments".
"Given the issues confronting the finance company sector at this time, the Board of Directors of the Company reluctantly concluded the Company was unable to operate in this market. The Directors and Trustee have taken this step as a measure to protect all investors and to ensure all investors are treated fairly," Perpetual Trust said.
LDC owes $11.1 million to 408 debenture investors, $7.9 million in on call unsecured deposits to 576 customers and $300,000 in unsecured term deposits to 11 customers.
LDC's directors said they expected all debenture holders and depositors would be repaid in full.
LDC was one of all the finance companies which responded positively last week to a Securities Commission query about their financial fitness.
Perpetual Trust chief executive Louise Edwards told NZPA that LDC had experienced a run on its funds only over the last two days.
She said Nelson-based LDC had around half of its funds on call and its investors, both those who had funds on call and debenture holders, had rung demanding their money back.
She described the run as unprecedented.
"Liquidity is a real problem particularly if people have on call deposits," she said.
Ms Edwards said LDC was fundamentally a good company with good assets but was unable to sustain such a run.
It had assets across the board, but particularly in commercial property.
She believed investors would eventually get all their money back.
She said calling in the receivers was a "holding action" so that all investors would be treated fairly.
In the past 16 months eight finance companies have gone into receivership, owing investors $1.14 billion.
LDC is the third of those companies in which Perpetual Trust has been the trustee -- the other two being Nathans Finance and Provincial Finance.
According to information on interest.co.nz, LDC Finance invests mostly in property development and real estate, financial sector assets, and rural assets.
- additional reporting by NZPA
