Auckland property lender Orange Finance has frozen debenture repayments while its trustee decides whether to call in receivers.
Sole director Doug Somers-Edgar, who founded the investment advisory business Money Managers, has told debenture holders the property market squeeze has put some of Orange's largest loans at risk.
Thecompany has therefore decided to stop repaying maturing debentures and interest from December 22.
Mr Somers-Edgar was entertaining guests at his Torbay home last night, and his family said he was unable to come to the phone to provide details of the company's finances.
Orange has mainly lent funds for residential first mortgages, after raising debentures from the public via Money Managers, from which Mr Somers-Edgar stepped aside in June.
Money Managers has previously been criticised for the way it channelled funds raised from investors into investment products associated with itself and Mr Somers-Edgar, including six trusts called First Steps, which closed two years ago owing more than $450 million.
Returns which Orange filed with the Companies Office for the year to March 31 showed $39.4 million in secured debentures on the debit side, and $41 million of net loans and advances among assets of $58.4 million.
Its auditors noted advice from Mr Somers-Edgar of a rapid decline in the property market "that could result in the company not being able to meet its obligations as they fall due".
Another amber light was flashed in August when Orange's trustee, Graham Miller of Covenant Trustee Company, confirmed it had stopped accepting new investments while continuing at that time to meet interest and principal repayments.
In his latest advice to investors, in a message sent last week on the day Orange froze its debenture repayments, Mr Somers-Edgar said the most important challenge facing the company was to maximise the recovery of 17 outstanding loans.
He said Orange would prepare a report to send to its trustee early in the New Year as to the best way of managing its loan book and to repay debenture holders.
It would then be up to the trustee to decide whether to appoint a receiver or to call a meeting of debenture holders.
"Until this time, neither Orange nor the trustee can provide any additional information to debenture holders."
