Strategic nearing 14-day make-or-break window

Strategic Finance will have 14 days to negotiate a settlement with its trustee or find the required cash to avoid receivership if it fails to pay investors their first instalment under its moratorium plan on January 7.

The company froze repayments in August last year but secured a moratorium from investors in December.

Having been unable to make an initial repayment in September this year, the company was due to make its first return to investors on January 7.

However, chairman Denis Thom warned investors this week it may once again be unable to make the repayment, citing difficulties in recovering "a number of specific loans".

Yesterday, Louise Edwards of Strategic's trustee, Perpetual Trust, said failure to make the repayment in full would trigger an "event of review".

"So we would need to understand better the circumstances under which they are not paying debenture holders.

"For example if it was a timing issue of a few days or a week, we need to understand if they can actually rectify the breach. We will be reviewing the situation at that stage."

Chief executive Kerry Finnigan told the Business Herald that Bank of Scotland International, which stands ahead of retail investors in the queue for repayment, was likely to either be repaid its $25 million prior charge in full by the December 31 deadline or it would agree to an extension.

The $25 million prior charge had been reduced to $11 million including a $5 million payment this week, "with a further reduction likely to occur very soon".

Strategic has not indicated how much it intended to repay retail debenture holders on January 7.

In August, the company advised investors that, following further deterioration in the property market, returns under the moratorium were likely to be in a range between 85c and 93c in the dollar, down from the full repayment plus interest it forecast.

Edwards told the Business Herald she had not had the opportunity to evaluate the effect on Strategic of tighter new regulations for finance companies in moratorium which were approved by the Cabinet this week and which take effect on January 31.