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Strategic Finance is expected to announce details on Monday of a capital restructure plan for investors which could include 30 per cent of their money being paid out in three instalments over the next three years, with the balance invested in listed bonds.
Strategic announced a freeze on
redemptions on Thursday stopping 15,000 investors from taking out around $325 million.
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 to buy out the business with support from the Australian arm of the Halifax Bank of Scotland (HBOS).
It had been hoping to complete the buy-out with a $150 million funding line from the bank but said deteriorating investor sentiment had meant it will also have to incorporate a recapitalisation of the business into the deal - a move that needs investor approval.
Yesterday Strategic said it had expected to make an announcement in relation to the negotiations with Allco Hit and the consortium but talks were still continuing.
However, an email sent out to financial advisers and leaked to the Herald reveals the plans are likely to include a drawn out process for investors.
The email, sent by managing director Kerry Finnigan to reassure advisers, states that as part of the capital restructure secured debenture holders would be asked to accept certain arrangements.
They include: 30 per cent of their investment repaid in three equal instalments on March 31 2009, September 30, 2009 and March 31, 2010.
The balance of investors' money would be invested in three-, four- and five-year secured listed bonds in equal portions while interest would continue to be paid quarterly but in arrears.
Those who are subordinated debt holders would also be asked to agree to interest being paid in arrears but will also be asked to reinvest in the five-year secured listed bonds.
While perpetual preference shareholders would be asked to agree to the release of the Allco Hit guarantee.
When questioned about the email yesterday, Finnigan said he could not comment on the proposals because it had not yet been announced to the stock exchange and would breach disclosure rules.
Finnigan said it had hoped to get approval from Allco Hit for the transaction to go ahead on a conditional basis yesterday morning.
But delays in the process meant it was now likely to be Monday before it would announce the details of its transaction.
He confirmed the consortium had been forced to include the capital restructure in its plans because of nervousness from HBOS.
Finnigan said the bank told the consortium that while it was prepared to provide capital for the business to support future growth, the money was not intended to substitute that of debenture holders.
"They said 'we like the company and we like the people involved but our intention was not to turn up and underwrite debenture holders. We wanted to help fund the long term future of the business not to replace investors' capital'."
He said the bank agreed to commit to the transaction on the basis the company undertake a capital restructure.
Despite the resistance from the bank and the down-turn in investor sentiment and the property market Finnigan said the consortium was still interested in buying out Allco.
Finnigan said its focus was on getting the deal signed on a conditional basis. It was still hoping to complete the buy-out by the end of September but would have to get investor approval, shareholder approval and permission from the overseas investment office to go ahead.