Warning for Dorchester Finance investors over buyout offer

An unsolicted offer for Dorchester Finance debentures has prompted a warning from the Securities Commission. Photo / The Aucklander

The Securities Commission is warning investors in Dorchester Finance to be wary of an offer by Australian firm Stock & Share Trading Company PTY Limited to buy their debentures for 5c in the dollar.

The commission says investors to be cautious of any unsolicited offer to purchase their investments, especially where the offer was well below face value. It urged investors to seek professional advice before making any decision.

Stock and Share Trading Company PTY Limited has made similar offers for debentures issued by Strategic Finance Limited and St Laurence Finance Limited.

"When a finance company is in moratorium it is very difficult to accurately assess the value of the company's debentures. The debentures are not trading on any organised market, so there is no market price against which investors can assess the offer," the commission said.

A capital reconstruction plan was approved by security holders at a meeting earlier this month.

Investors should consider the value Dorchester Pacific Limited's directors had placed on securities to be issued under the capital reconstruction plan, when presented with an offer, the commission said.

As of July 1, 50c in the dollar of principal had been repaid to debenture holders in Dorchester and 10c in the dollar had been repaid to subordinated note holders.