Rebranded Geneva plans new rights issue after $127m repayment

Geneva managing director David O'Connell said the company had been trying to build its credibility in the marketplace. Photo / Kenny Rodger

A finance company which is still paying back investors after going into moratorium nearly five years ago plans to launch a new prospectus to tap up the public again.

GFNZ, formerly known as Geneva Finance, wants to reactivate its prospectus in the next three to six months.

Geneva was placed into a moratorium in November 2007 owing investors more than $138 million. It has paid back $127.2 million so far which includes 11 per cent interest per annum. In June last year, the Financial Markets Authority issued GFNZ with an interim order to stop it raising money from the public after it said the company failed to disclose a banking covenant breach.

Geneva managing director David O'Connell said the company had been trying to build its credibility in the marketplace.

In February Federal Pacific Group, a financial services group with ties to Ireland's Fexco, took a cornerstone stake in the company paying $1.2 million or 2.75c a share for the 19.9 per cent investment. Yesterday, Geneva said FedPac would underwrite a four for one rights issue to existing shareholders at 2.75c per share.

Shares in the company last traded at 2.2c.

"The company is building its credibility with the marketplace. This is step two. We have to do the steps one at a time."

O'Connell said the company hoped to reactivate its prospectus in the next three to six months.

"I think we have a lot of credibility with existing debenture holders. We have paid money back. Many of them had investments with other finance companies that didn't make it."

O'Connell said while some of its current debenture holders might want to get their money out, he expected some would reinvest.

A spokesman for the FMA said it would review the documents of any issuer deemed to be high-risk and take action if required.

O'Connell said the rights issue would open in early August.

Shareholders, many of which are also debenture holders, will have their stake in the company watered down if they don't take up the rights.

If no other shareholders take up the rights issue FedPac will increase its stake to 35.6 per cent. Any increase in shareholding above 20 per cent would trigger a takeover for the whole company.

But O'Connell said FedPac had no plans to make a takeover offer.

Geneva would hold a shareholders meeting next month asking for dispensation for the stakeholder increase, he said.

O'Connell said he expected the larger shareholders in the company to take up the rights issue but it was difficult to predict how many of the smaller investors might do so.

Geneva has around 2600 shareholders.

O'Connell said the 2.75c price was set because it was the same as the investment made by FedPac. "Our net asset backing is just over 5c. By having a rights issue at 2.75c it is fair to all," he said.

The rights issue is expected to raise $1.5 million for the company.

O'Connell said the money would be used to help make a scheduled repayment to debenture investors of $5 million in September and extend its lending in the car finance market.