Look out for Monday's special section in The New Zealand Herald reviewing the state of our finance companies.
KEY POINTS:
The finance company sector crisis deepened today with a firm that has loans of more than $630 million signalling it is on the brink of collapse.
Christchurch-based Property Finance Group, signalled deep trouble when the board of the NZAX-listed company suspended trading of its shares today.
If the
receivers are called in on Monday as seems likely, it will be the sixth finance company in 15 months to fall over.
Just this week Nathans Finance was put into receivership with 6000 investors owed $166 million.
The Property Finance suspension was due to "concerns about the company's ability to manage its current liquidity position given the significant changes being experienced in the financial markets", the company told the stock exchange.
Chairman Barney Sundstrum said he was not confident about the firm's prospects as it was having difficulty honouring its debts.
He blamed a drying up of credit in the debenture and wholesale markets.
"That leaves us with problems for us terms of meeting its obligations as they fall due in the short-term.
"There has been a flight to cash."
He said funds to second tier lenders had dried up while contagion from the "mess" on the international scene had affected the wholesale market.
Property Finance had good, well-performing assets and was looking at "restructuring opportunities", he said.
"We have no reason to believe debenture holders won't get paid back in full," Mr Sundstrum said.
"It will take a period of time."
All Property Finance's assets were first mortgages in residential and commercial property.
Around 4000 investors have lent Property Finance $80m in debenture stock.
Property Finance stopped accepting funds on Wednesday when it really understood the extent of its problems.
Its lifts at head office in Christchurch were locked off today.
Investors trying to ring were told in a recorded message that due to "significant changes being experienced in the financial markets" the company had suspended trading.
It told people it was investigating restructuring opportunities and would advise of developments on Monday.
Last Friday, Property Finance took apparently desperate action to raise capital, selling its 13.3 per cent stake in fellow NZAX-listed company CBS Canterbury for $5m and a 9 per cent stake in NZAX-listed Loan and Building Society for $1.9m.
It had planned to marry the three companies, although the other two said they were not party to the plans.
Southern Cross Building Society bought the stakes at $5.15 a share for CBS and $5.20 a share for LBS.
Southern Cross Building Society chief executive Bob Smith said his company had not had discussions with Property Finance to buy any assets.
Mr Sundstrum denied the company knew it was in trouble when it sold the shares last week.
He said that had been a predetermined strategy although NZPA understood the stocks were hawked around, with potential buyers told to decide within 24 hours.
"It all came home to roost in the middle of the week," Mr Sundstrum said.
It was not a foregone conclusion that its bank, ANZ National, would call in the receivers on Monday, he said.
"We are working on a number of different options to see if we can circumvent that."
It was doubtful Property Finance would remain in its existing form, he agreed.
Property Finance's shares last traded at $1.10, having fallen from $1.38 in June. The company is capitalised at $15m.
Stock exchange head of marketing services Elaine Campbell prompted today's suspension after she wrote to Property Finance and other finance companies about concerns and speculation surrounding finance companies.
"The events should give all finance companies cause for reflection," she said.
"Given the current environment, New Zealand Exchange Limited considers it incumbent upon itself to write to all listed finance companies and listed companies with material finance company subsidiaries (the failure a subsidiary can (and has in a recent example) impact parent viability)."
Property Finance, formally Avon Investments, reported in its 2007 annual report it had loans receivable of $412.6m, and cash or cash equivalents on hand of $109.2m.
The accounts showed it had debt notes of $425.9m and debenture stock of $86.6m.
This year it tried to buy a stake with in Canterbury's Loan and Building Society, with a view to a merger. CBL has assets of $180m.
- NZPA
