St Laurence investors may get 28c - report

Kevin Podmore. Photo / Glenn Jeffrey

The 9000 investors in failed Wellington financier St Laurence might get as little as 28c for every dollar they are owed, says an expert report.

Accountancy firm McGrath Nicol was commissioned by St Laurence to study the state of the business, which last week went into receivership. The report, which has not been made available to investors, was completed before receivers were called in.

The mid-point payout for debenture and capital note holders was put at 34c and the high point at 40c. Investors are owed $245 million.

The forecasts were made under a receivership scenario. The accountants said the estimates did not take into account the receivers' costs.

The report examined the value of St Laurence's interest in the NZX-listed National Property Trust and NZDX-listed Irongate Property.

St Laurence holds 15.9 per cent of National, a stake valued at $22.2 million. National's properties include the $30.4 million Eastgate mall in Christchurch.

St Laurence owns 34.3 per cent of Irongate, a stake valued at $29.2 million. Irongate's properties include the nine-level waterfront ex-harbour board building at 139 Quay St which once carried the St Laurence name on its top.

McGrath Nicol said the two other St Laurence investments were in Direct Property Investment (No 9) and Direct Property Investment (No 6)/Princes Wharf Hotel.

The first business owns a North Harbour industrial property in Auckland and the second has a sub-lease interest in Hilton Auckland.

But McGrath Nicol also raised concerns about Irongate's future, saying it faced liquidity issues.

"Irongate has $80 million of bonds on issue of which $30 million are due for repayment in June and the remaining $50 million to be repaid in May 2011. The bonds are listed on the NZDX," the report said.

"We understand Irongate's management is currently working through strategies to bridge the funding gap. These include additional bank funding, property sales, rights issues and an asset-for-equity swap with St Laurence," McGrath Nicol said.

"The realisable value of St Laurence's investment in Irongate is highly dependent on the ability for Irongate to meet its bond repayment obligations," it said, raising valuation issues on St Laurence's stake in Irongate if a receiver was appointed.

The report traced St Laurence's troubles to 2006 when the finance collapses began. The December 2008 recapitalisation plan hit trouble when the property market downturn proved worse than expected.

Chris Minty is the general manager of Irongate, formerly St Laurence Property and Finance. Irongate announced it had sold properties for about $100 million since April last year.

Kevin Podmore, Irongate's chairman, said most of that had gone to repay banks.

"We want to make Irongate healthy and to do that we have got to reduce debt. We did that with National Property Trust, which had debt levels of about 45 per cent and now are down to about 22 per cent. National is a lot healthier and we want to do the same with Irongate," he said, adding that the name was changed because it had been "tainted" with the St Laurence brand.

The past two years had been hard, Podmore said, and he had suffered emotional and financial stress.

"I suppose I've spent the last 15 years building the business up," he said, estimating St Laurence was worth about $120 million in its heyday.

"Now, it's worth zero and maybe I should not have put all my eggs in one basket.

"On a personal basis I didn't foresee the downturn and I wish I had, with the benefit of hindsight."