KEY POINTS:
Debenture investors owed $110 million by Lombard Finance and Investments will lose more than half of their money, receivers PricewaterhouseCoopers said yesterday.
Lombard last month became the 17th finance company to hit the wall in two years.
In a letter to investors last week, PricewaterhouseCoopers partners John Waller
and John Fisk said the eventual payout to Lombard's 4400 debenture investors was likely to be between 21 and 44 per cent of their principal.
No interest was to be paid and unsecured subordinated and capital note investors owed $14 million were "highly unlikely" to receive anything.
Waller and Fisk acknowledged the news would come as a shock to many investors.
Lombard's management portrayed the company as a casualty of a "systemic failure" in the industry and had been seeking new funds from investors, and representing its financial position as sound up until a few days before it ceased trading.
Management also attempted to secure a moratorium from its investors, although this proposal was dismissed in short order by the company's trustee.
Lombard's assets consisted primarily of $136.8 million in loans on property developments. That market softened rapidly in recent months, a contributing factor to the company's demise. But Waller and Fisk said the sluggish market was now also impacting on the realisation of the company's assets.
The Business Herald reported early last month that Lombard had exposure to troubled Wellington residential property development Brooklyn Rise.
Yesterday, Waller and Fisk said: "One of the developments on which LF&I has lent substantial funds will require further funding to complete and the level of recovery is uncertain."
According to management accounts there are $800,000 in provisions for doubtful debts on Lombard's property loan book.
"In our view this is significantly understated," said Waller and Fisk. "Further substantial provisions are required." The receivers said they completed restructuring Lombard's management, and the services of executive director Michael Reeves had not been retained.
Waller and Fisk said they would notify "appropriate Government authorities" of any potential breach of legislation or the company's trust deed that came to their attention.
"Those authorities may take such actions as they deem appropriate."
The receivership also applied to three other subsidiaries - Lombard Asset Finance Ltd, Lombard Property Holdings Ltd and Lombard Asset Finance No 2 Ltd.
Out of assets totalling $143 million, the companies under receivership had net assets of almost $16 million. Listed parent Lombard Group continues to operate. Its shares closed at 15c.