After a distressing 2011/12, the battle-scarred Pyne Gould Corporation (PGC) reported a small (unaudited) net profit after tax late last Friday.

Although the $1.5 million profit, out of which a dividend won't be paid, for the six months to December 31, 2012, is unlikely to over-excite the PGC share-holders (who, judging from the turn-out at last year's AGM are not really excitable types anyway) but it is a marked reversal from the $27.1 million loss over the same period in the previous year.

The company may look in better shape compared to a year ago but it's also in a completely different shape. What was originally envisaged as a New Zealand financial services conglomerate set to challenge the stranglehold of Australian banks is now essentially an opportunistic investment fund scouring for distressed debt deals in down-trodden Europe with its controversial managing director, George Kerr, spear-heading the search.

The latest PGC accounts reveal the transition is almost complete. Messy losses have been written off, tricky operations shunted off to new entities or divested.


All that really remains is for PGC to complete the sale of its Perpetual/van Eyk business to a concern headed by Andrew Barnes, former head of ASX-listed firm Australian Wealth Management (which, in turn was formerly part of Tower Australia and is now merged with IOOF). According to the PGC accounts, the Perpetual and van Eyk (an Australian fund research house and investment manager) package, which was wrapped together last year, is valued at about $9.2 million. Together, the two entities lost about $422 million in the six months to end of last December, although the loss was entirely attributable to Perpetual NZ.

From here on in, most of the PGC action looks like it will occur within the framework of the Torchlight Fund, which itself has been restructured as a Cayman Islands-domiciled entity.

"The Group increased its investment in TLP to 20.5 per cent through the purchase of partnership interests from existing limited partners in the period to 2 October 2012," the PGC accounts say.

"From this date, the Group considered TLP to be an associate. On 21 December 2012, the assets and liabilities of TLP were transferred to Torchlight Fund Limited Partnership ('TFLP'), a newly formed limited partnership registered in the Cayman Islands. The investment held by TLP in TFLP was then in specie distributed to the limited partners of TLP."

The PGC accounts also reveal TFLP has made a "non mandatory" call of up to $150 million of new capital.

"TFLP expects to be in a position to close fully subscribed and issue partnership interests within the first quarter of 2013," the PGC accounts say. "Subscriptions will be used for investment purposes - primarily to consolidate ownership of key investments and targets, in particular RCL [Real Estate Credit Limited - an entity managing "certain non-core real estate loans" of former PGC subsidiary MARAC] debt which is TFLP's largest asset."

It is understood one of PGC's new 'distressed debt' investments was achieved as part of a consortium that bought out the regional newspaper arm of the UK Daily Mail group last November. The deal would see PGC owning a stake in papers published in places like Bristol, Leicester and Derby - all a long way from PGC's South Island roots.

PGC will leave New Zealand even further behind (although local shareholders may want to go along for the ride) when it changes its listing residence later this year. The change of address, expected soon after the Perpetual/van Eyk sale goes through, will most likely see PGC calling the UK home.