Strategic chief slams receivership

Strategic lent money to the stalled Soho Square development in Ponsonby. Photo / Steven McNicholl

The boss of Strategic Finance has slammed its trustee for placing the company into receivership and says investors will be worse off.

But Perpetual Trust says receivership is the best option and it has acted only in the best interests of investors.

Perpetual yesterday appointed receivers PricewaterhouseCoopers partners John Fisk and Colin McCloy to help wind down Strategic's $220 million loan book and attempt to pay back some of the $416 million owed to its 13,000 investors.

Perpetual had been assessing a number of proposals by third parties to buy up the book but had decided receivership was the best option.

Strategic Finance chief executive Kerry Finnigan said the decision was a "huge disappointment".

"We worked very hard as a board and management to deliver up viable options to the trustee."

Finnigan said it had put together five viable options, two of which would have delivered immediate cash payments to investors as well as ongoing payments.

"The trustee has decided to take the safe harbour approach."

Finnigan also questioned the independence of PricewaterhouseCoopers being appointed receiver after the trustee had put the proposals to PWC to assess their potential success against a receivership.

He said the company, which lent money to the stalled Soho Square development, had gone to a lot of effort to secure the offers and they were from credible parties but it had not been given enough time to finalise the deals. "It's tough enough trying to sell a house in three or four weeks let along a loan book worth $200 to $300 million," he said.

Finnigan said the proposals he put forward could have seen investors paid back 65 to 70c in the dollar. "There is little doubt in our minds that a receivership will be a far worse outcome."

But Perpetual Trust's Matthew Lancaster said the company had only acted in the interests of investors and it believed the receivership would give the best chance of getting investors their money back.

Lancaster said he had given Strategic two months to develop the proposals and did not believe they would have been any better with more time.

Lancaster admitted PWC did review the proposals but said the final call was its decision and it had taken into account any potential biases.

PWC had been overseeing the moratorium and were best placed to assess the options, he said.

"We would probably be accused of wasting investors' money if we appointed someone because of the time it would take for them to come up to speed. We are between a rock and a hard place as far as that is concerned."

PWC receiver John Fisk said it had only assessed the options and it had been up to Perpetual to make the final decision. He said it was too early to say how much investors would get back but he hoped to give a better break-down in six weeks.

"The receivers will be focused on achieving the best outcome for investors, and in particular that it is expected ultimately to provide better returns for investors."

Fisk would not name the bidders involved in the offers and said a sale of the loan book could still be an option.

WHAT WENT WRONG

January 8: Strategic fails to make its first payment to debenture investors triggering a review of its moratorium
January 15: The company decides to put aside more money for bad debts after the value of its loans falls to $220 million triggering another review because the loan value is less than 75 per cent of the $477 million owed to investors
February: Strategic in talks with a number of bidders
March 3: One bid put forward to the trustee
March 12: Receivers appointed