KEY POINTS:
Just a few weeks after Dominion Finance Group's major shareholder, Terry Butler, tried to retrieve his company from receivership in favour of a management-led wind-down, receivers have found the company's loan book is in a mess.
Dominion Finance Group, the largest subsidiary of listed company Dominion Finance Holdings, froze repayments to 6055 debenture investors owed $224 million in June, having been squeezed between falling reinvestment rates and the softening property development market.
In his first report to investors, receiver Rod Pardington of Deloitte said he expected debenture holders would, over time, receive between 10c and 25c in the dollar of their principal back. Unsecured investors will get nothing.
While Pardington said the low level of expected recoveries was in part due to the property market downturn, it was "much more significantly due to the lending decisions made by DFG".
DFG's loan book was "exposed to severe risk of loss" because 80 per cent of the loans were secured by second or subsequent mortgages, they were mostly on property developments, many were not paying interest which was instead being capitalised on loans, and most were in default already by September 9.
Butler in September sent letters to Dominion debenture investors in an unsuccessful bid to gain support for a meeting to vote on whether the receivers should be removed and a moratorium implemented.
