Strategic deficit $195m, and it may get worse

Strategic Finance's directors include ex-All Black captain Jock Hobbs. Photo / Mark Mitchell

Former glamour funder Strategic Finance, whose directors include ex-All Black captain Jock Hobbs, is in the red to the tune of a shocking $195.5 million, grim news for 13,000 investors.

A bleak report issued on the doomed Strategic Finance - in receivership and liquidation - by John Cregten and Andrew McKay of liquidators Corporate Finance revealed the huge deficit which they said was still subject to the cost of receivership and liquidation.

The final amount might be more.

Strategic was New Zealand's second-largest financier to collapse after Bridgecorp.

It was run for years by Hobbs, now suffering ill-health and resigned from his high-profile sports posts.

Once in Princes Wharf offices, the business went into receivership in March owing $452 million to its 13,000 investors.

John Fisk, a Strategic receiver at PricewaterhouseCoopers, said 10,000 of those 13,000 investors were classified as secured creditors but this did not necessarily mean there was lots of money for them.

On September 15, he will pay investors 2 cents in the dollar and he said this was on top of a previous payment Strategic had made when it was trading in moratorium two years ago.

Fisk cannot say when or if he will pay more money because this depends on realising assets and the values recovered from the financial disaster.

Cregten and McKay reported the latest financial position of four companies: Strategic Finance, Strategic Nominees, Strategic Advisory and Strategic Mortgages.

They rolled all assets and liabilities of those impoverished companies into one sorry statement of position.

"The liquidators believe the value of the assets of the company available for distribution to unsecured, non-preferential creditors is likely to be zero," Cregten and McKay wrote.

"Therefore a meeting of creditors would be an unreasonable additional expense, further reducing the funds available to complete the liquidation."

The Securities Commission has already appointed an inspector to probe the collapse and documents have been seized as breaches of various laws are investigated. The outcome of this investigation is yet to be announced and those close to the investigation said it was complicated and no announcements could be made.

In May, Hobbs stepped aside as NZ Rugby Union and Rugby NZ 2011 chairman to have six months of therapy for leukaemia. He was Strategic's chief executive and remains a director.

Cregten and McKay produced a group statement of assets and liabilities which showed its few assets included $11,721,000, made up of accounts receivable, cash and other assets.

Strategic has charged assets which include its net property loan book of $234,443,000 and fixed assets of $555,000. Assets listed as being available to secured creditors are $246,718,000.

But this is offset by huge debts including $76,112,000 owed to Bank of Scotland and $291,691,000 owed in secured debenture stock.

Strategic's directors are Hobbs, Kerry Finnigan, the ex-Hanover chief executive who was also Strategic's chief executive, Graham Jackson, Marc Lindale, Denis Thom of Wellington and David Wolfenden.

The liquidators produced a varied list of 65 creditors.

State creditors include Land Information NZ, NZ Post, and the Auckland office of the Ministry of Economic Development.

Other creditors include Accent on Travel, BDO Spicers Wellington, Bell Gully, Contact Energy, Diners Club International, H G Livingstones, Just Water, Knight Coldicutt of Princes Wharf, Konica Minolta, Perpetual Trust, Office Max, Strategic Advisory, Southern Cross Healthcare, Spotless Services, Telecom NZ, Triumph Capital, The Barrow, now-axed business newspaper The Independent, Williment Travel, Woolworths Shopping and Yellow Pages Group.

Strategic, which funded a group of extremely risky high-profile but now failed real estate projects, ceased trading on March 12 and went into liquidation on July 26 after an application was granted in the High Court.

The liquidators have advised Strategic creditors to complete a claim form by September 24 and told the 13,000 investors they must keep dealing with PricewaterhouseCoopers.

"Debenture stock holders and investors who have submitted a claim to the receivers should not submit another claim to the liquidators," Cregten and McKay wrote.

The liquidators are now trying to sell Strategic's loan book but won't predict what will happen next.

IN BIG HOCK

Strategic Finance + associates:

* 13,000 investors owed $400 million.
* NZ's second-biggest finance collapse.
* Suffering $195.5m funds shortfall.

December 2008: Moratorium struck.
March: Went into receivership.
July: Fell into liquidators' hands.
Now: first liquidators' report out.
September 15: 2c in the dollar payout.