The trustee for stricken finance company Property Finance Securities has written to investors expressing concerns about management's plans to alter the terms of its current moratorium, which have already been breached.
Investors in Property Finance Securities, which was placed in receivership in August 2007 owing them $79 million, have until June 27 to submit proxy votes on the new proposal. It asks them to write off interest they are owed under the previous arrangement, accept a lower interest in the future and extend the moratorium for a further two years.
In a letter to investors accompanying documentation for the new proposal, Covenant Trustee Company's Graham Miller says an independent appraisal of the deal by Northington Partners makes assumptions that are largely those of the company's board and management.
"The expert advises it is not possible to objectively evaluate these assumptions."
Miller says the new plan is based on the directors' view that they are better placed than a receiver to manage the wind-down of the company's assets, which consist of $17.5 million of direct property loans and $53 million in "debt notes" in four loan trusts set up by parent company Property Finance Group.
However, Miller states: "From a legal and practical viewpoint, a receiver would be able to undertake most of the activities which the directors are proposing".
Miller said there was "no assurance" the directors would be able to undertake the specific measures they are planning or would be able to recover more money than a receiver.
Nevertheless, he said, it was "reasonable" for investors to be given the chance to consider the proposal.
Property Finance Securities breached the terms of the original moratorium in December last year when it was unable to make a scheduled repayment in its entirety.
A meeting to vote on the new proposal, which requires 75 per cent approval, is scheduled for June 29.
FINANCE FALLOUT
* Property Finance Securities was put into receivership in August 2007, owing 4000 investors $79 million.
* Investors voted to put the company in a moratorium in December 2007.
* However, Property Finance has breached the terms of the moratorium and is now seeking investor approval for a new proposal, which involves extending the moratorium for two years.
Concern over Property Finance plan
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