KEY POINTS:
The Stock Exchange has suspended trading in VTL Group Limited shares, as the finance company has collapsed.
VTL Group, the parent company of Nathans Finance, has told the stock exchange it is insolvent.
The Securities Commission is investigating.
VTL directors were to meet the Companies Office today, the
stock exchange said in a statement.
"NZXR will be seeking further information from the company to be released to the market," the exchange said.
The collapse followed finance company Bridgecorp last month being put into receivership, after defaulting on repayments of some term investments due to investors.
In total about 18,000 investors were caught up in that collapse.
Nathans Finance NZ Limited, which is a wholly-owned subsidiary of VTL, has raised $150 million from debenture investors.
It lends the bulk of its debenture money to VTL, a franchiser of vending machines and related systems
The most recent Nathans prospectus, to June 2006, showed loans to VTL of $79.6 million, all of which was due to be repaid by June 30.
Its prospectus noted that Nathans lent to VTL, and that VTL was seeking to repay those loans.
"If VTL...is unable to repay this debt then...the company is likely to become insolvent itself."
On Saturday, the Registrar of Companies gave notice to Nathans that it was to:
* not remove from New Zealand, transfer, charge, or otherwise deal with its property or funds without the approval of the registrar;
* place in a trust account any money received for investment.
Directors of Nathans and VTL were to have "immediate" talks with Perpetual Trust Limited and Covenant Trustee Company Limited about bonds previously issued by VTL subsidiary, Chancery Finance Limited.
Nathans directors would immediately cease distribution of the company prospectus.
Chancery Finance Limited has previously ceased to issue bonds and does not currently have a prospectus on issue.
"The directors of VTL believe that as a result of the above, the transaction with Bacon Whitney Corporation previously disclosed to the market will not be able to proceed to shareholder approval," the statement said.
Issues have arisen concerning the financial viability of VTL, including a draft report prepared as part of the Registrar's investigation of VTL, which has just been received by VTL, it said.
Nathans directors felt the announcement about Nathans and the decision to withdraw its prospectus, would lead to a fundamental lack of confidence in the company.
In the current climate confidence would not be able to be recovered, the statement said.
"The value of Nathans will thus be seriously impaired, resulting in VTL ceasing, in the directors' opinion, to be solvent. VTL will accordingly need to cease to trade."
Within the last year, a number of high-profile New Zealand finance companies, National Finance 2000 Limited, Provincial Finance Limited, and Western Bay Finance Limited, have collapsed owing investors almost $400 million.
Bridgecorp's collapse just last month dwarfed them all, with the financier owing $500 million to investors at the time of its demise.
- NZPA