KEY POINTS:
Strategic Finance has become the latest finance company to freeze redemptions, stopping about 15,000 investors from taking their money out.
The announcement came after the NZX-listed firm was placed on a trading halt yesterday.
Strategic Finance is the 26th finance company to hit trouble in the past two
years.
The firm is owned by Australian investment company Allco but has been in talks with a consortium led by former All Black and director Jock Hobbs since July 17 to buy out the business.
The arrangement was expected to include a $150 million credit facility with the Bank of Scotland to help to reduce the firm's reliance on debenture investors who have been pulling their money out of finance companies in droves since the collapse of Bridgecorp in July last year.
But yesterday Strategic said that in addition to the sale of the business it would have to go through a capital restructure which would require consideration by Strategic's security holders.
They include debenture stock holders, subordinated noteholders and perpetual preference shareholders who are thought to have about $325 million tied up in the business. "While the negotiations have been continuing there has been a further material decline in the property finance market sector and reinvestment rates."
Strategic said it was suspending redemptions and had ceased accepting new investments for debenture stock and subordinated notes as of yesterday to "protect the position of security holders" and allow for the negotiations to be completed.
The deal was expected to be finalised by the end of September. Strategic's freeze follows that of fellow property financiers Hanover, Dorchester Pacific and St Laurence.
Strategic Finance was set up in 1999. Half the business was sold to Allco in 2006 and the remainder was bought out by the Australian firm in March last year for $225 million. It has around $639 million in assets.
Speculation that Strategic would be sold again began this year when Allco Finance Group announced a major strategic review amid discussions about its own bank funding lines in the wake of the global credit crunch.
In July a consortium including directors Hobbs, Graham Jackson and Marc Lindale, as well as chief executive Kerry Finnigan, said they had agreed on indicative non-binding terms with All Hit to buy the company.
The deal was expected to see Bank of Scotland have an initial 19.9 per cent stake in the business with the ability to increase it to 49 per cent.
At the time of the announcement, Finnigan told the Business Herald the proposed ownership change would ensure Strategic's long-term future.
"Despite current market conditions, history has shown that the need for strong finance companies in New Zealand will not disappear.
"We have every confidence that the change of ownership will ensure that Strategic Finance will be one of the companies servicing this need." he said.
A further announcement by Strategic is also expected today.
