KEY POINTS:
Almost half of the loans made by Owen Tallentire's failed Capital + Merchant Finance were to related parties including entities associated with Tallentire himself and other directors, the company's receivers say.
Insolvency specialists Grant Thornton, who are acting for US based Fortress Credit Corporation, released an update on their work late last month. In the report they say that in addition to six related party loans totalling $37.6 million, which were disclosed in company records when they were appointed in late 2007, they had identified a further $41.1 million in loans "that in our view, contain certain 'related party' elements, but were not recorded as 'related party' loans in the company records".
These, together with recorded related party loans, represented 43 per cent of Capital + Merchant's entire $182 million loan book.
"Various matters in relation to these loans have been highlighted to the relevant authorities and are currently under investigation," said Grant Thornton's Richard Simpson and Timothy Downes in their report.
Capital + Merchant, which enjoyed a high profile due to its sponsorship of TVNZ's prime time newscasts, was placed in receivership in November 2007 by Fortress, which has now largely been repaid the approximately $70 million it was owed. Capital + Merchant turned to Fortress for funding in late 2006 when debenture reinvestment rates came under pressure following the high profile failure of Provincial Finance that year.
Fortress took first ranking status over Capital + Merchant's assets, ahead of the existing 7000 debenture investors owed $167 million and was also paid a higher interest rate. Grant Thornton says Fortress should be repaid shortly while investors are unlikely to receive anything.
