The ballooning cost of bailing out Provincial Finance has sunk attempts to resuscitate the stricken finance company, but its receivers say debenture stock investors should eventually recover most, if not all, of their money.
Edward Sullivan, of South Canterbury Finance, which was leading a consortium of finance companies and investmentadvisers in a rescue bid, said a revised estimate of the sum needed to save Provincial had climbed to $45 million.
That effectively sank the proposal, which by early yesterday had raised only about $1 million.
Provincial was placed in receivership a week ago, owing 14,000 debenture stock investors more than $300 million.
Recent reports indicated that investors could expect to see only about 50 per cent of their money.
But receiver John Waller, of PricewaterhouseCoopers, said: "It is anticipated debenture holders will recover most, if not all, of their investment over time."
An initial part-payment would be made in September. The final result depended on a number of factors, most importantly, the quality of the loan book and its ultimate recovery.
Provincial foundered after lending aggressively in the South Auckland car market. It has taken flak for its relatively lax lending criteria, which some commentators said was exploited by fraudsters.
Sullivan said there might still be an opportunity to rescue Provincial by way of a scheme of arrangement under the Companies Act.
"It may involve the debenture holders allowing part of their debentures to become equity. However, that is a matter for them to work through with Provincial."
Provincial chairman David Lyall said he wasn't surprised to hear the bid had failed.
"I'd heard first thing this morning they'd only had $1 million pledged. It's obviously disappointing."
But he was pleased to learn the receivers believed debenture-holders would receive most, if not all, of their money back.
"That's really heartening, that's been what I've always thought."
