KEY POINTS:
Geneva Finance's investors will convene in a week's time to decide whether the stricken company has a future, and unlike the vote six months ago by which it secured a moratorium, the outcome is no near certainty.
Last November, the voting power of Bank of Scotland, owed $43
million, meant the moratorium always had a good chance of being approved. In the event, it was supported by other investors, including 3000 or so debenture stock investors owed $98.96 million, almost unanimously.
This time debenture investors are not only being asked for yet more time for the company's management to turn the ship around, they are being asked to forego some of the security protecting their cash by becoming shareholders.
What's more, the situation was complicated further yesterday as it emerged that an unidentified party was interested in buying the company's assets in a deal that could see debenture investors get most of their cash back in a few weeks, rather than the years that would take under management's plan, or the alternative - receivership.
With Geneva's proposal needing approval from 75 per cent per cent of those debenture investors who vote, the company's future is in their hands.
Bank of Scotland has already indicated its support, and it's safe to assume that subordinated note holders, who stand to lose all of the $12 million they are owed in a receivership or under reported terms of the potential new offer, will also back the proposal.
But Geneva's survival plan has met with little enthusiasm from commentators and analysts.
Chief executive Shaun Riley, who even the company's fiercest critics acknowledge is at the very least "hard working", is irked by much of the criticism.
Sentiment toward the company in some circles appears to be coloured by the fact that major shareholder Peter Francis, like Bridgecorp's Rod Petricevic, helmed one of the more notorious 1980s corporate failures.
But if investment bank Northington Partners' evaluation of Geneva's proposal is to be believed, the company is an entirely different kettle of fish to Bridgecorp.
Northington - which was hired by Geneva to review the proposal - estimates the lender, bad debts and all, has net assets of $4.8 million and debenture investors would get 80 to 100 per cent of their principal back in a receivership.
Details of the potential new offer that have been reported also appear to indicate the company still retains much of its value.
But Northington points out its own opinion is largely based on a review of "the model prepared by Geneva for the future financial performance of the company under the reconstruction proposal".
That model was "subject to a relatively high level of uncertainty" and assumed "no significant deterioration in the current economic environment".
Debenture investors must decide how likely such a deterioration is, given it would inevitably affect the quality of the company's loan book, and hamper the realisation of assets such as vehicles, recovered from defaulting borrowers.
On the other hand, Geneva's trustee Graham Miller believes these factors would also likely affect returns from a receivership as well.
Addressing concerns about his company's loan book, Riley concedes Geneva did suffer an increase in bad debts over the early part of this year when difficult seasonal conditions were exacerbated by the loss of collections staff who have now been replaced.
Furthermore, the company has lopped $13 million from annual overheads, cutting 150 staff and shutting 21 of its 22 branch offices.
Riley says the proposal which locks in $22.7 million in new shareholders' funds and a $35 million facility from the Bank of Scotland gives the company certainty of funding for the next two to three years.
THE RESCUE DEAL
* 15 per cent of debenture principal and 55 per cent of subordinated note principal to be converted into new NZAX listed shares.
* The balance of debenture principal will be repaid over the following 3 1/2 years along with interest
* Bank of Scotland, owed $43 million, gets $8 million back over the next five months, with the balance repaid by April 2011.
* Geneva's existing shareholders tip in a further $4.4 million in additional equity including $630,000 in cash.
OFFER DELAYED BY CRUCIAL VOTE
Troubled Geneva Finance has confirmed it was recently contacted by a potential buyer for its loan book but says the expression of interest was received too late to be considered ahead of a crucial investor vote next week.
"We can confirm that we have recently received a letter indicating interest in a possible purchase," the company said on Friday.
"This was discussed by the board mid-last week. However, with the pending April 28 investor vote, and the large amount of management time such a review would require, the board responded that they would be prepared to revisit the subject after the 28th of April vote."
Yesterday it was reported that an overseas company had expressed interest in buying the company's $154 million loan book in a deal that would see debenture investors get most of their outstanding principal back in a matter of weeks.
