KEY POINTS:
Capital + Merchant Finance, which owes 7000 investors about $190 million, yesterday became the 12th finance company to go bust in the past 18 months.
Like Rod Petricevic's Bridgecorp, whose failure this year triggered a rash of further receiverships, Capital + Merchant was a specialist property lender and
was particularly active in the Auckland market.
The country's 13th largest finance company with assets of about $250 million, Capital + Merchant had a high profile because of its sponsorship of TVNZ news, and it is exactly the type of high-profile failure market commentators feared could derail a tentative recovery in debenture reinvestment rates.
"The current state of the debenture market has meant that the ability of the companies to attract new funds and retain existing investments has been significantly constrained, leading to the companies being placed in receivership," said receiver Richard Simpson of accountancy firm Grant Thornton.
Mr Simpson said he and colleague Tim Downes had been appointed receivers by Australian company Fortress Credit Corp, which is owed about $20 million by Capital + Merchant after the finance company breached the terms of its loan agreement.
Fortress will be paid out ahead of Capital + Merchant's 7000 or so debenture investors, who are owed about $190 million, Mr Simpson said.
He hoped some indication of likely payouts to investors could be given within days.
Capital + Merchant's trustee, Perpetual Trust, has appointed KordaMentha partners Grant Graham and Brendon Gibson as receivers who will act on behalf of creditors other than Fortress.
Finance company analyst John Kidd of investment bank McDouall Stuart said "the warning signs were all there" for Capital + Merchant.
Its funding arrangement with Fortress, put in place within the last financial year on generous terms that put it ahead of existing investors, was one that Mr Kidd said was "disturbing".
"Liquidity-wise they were obviously in need of some fairly serious money and they were obviously prepared to give a fair bit away to secure that money.
"Outside of the top tier of finance companies there's a tarred brush which has hit all of them.
"This will certainly in my view undermine or delay any sort of recovery in debenture rollovers that we may otherwise have seen."
Kapiti Coast financial adviser and finance company commentator Chris Lee was far more blunt, saying Capital + Merchant's failure was essentially the final nail in the coffin for the weakest quarter of all finance firms in New Zealand.
* DOWN THE DRAIN
More than $1.5 billion has been invested in 12 failed finance companies.
Some of the money has been repaid by receivers.
Thousands of investors have lost money in the string of collapses.
