KEY POINTS:
Strategic Finance investors won't see any interest or dividend payments until at least November after the company said it was putting them on hold while it works on a capital restructure plan.
The property finance company last month froze redemptions for the 15,000 investors who have $325 million tied up in the business.
Yesterday it said it would not be paying interest due to debenture or noteholders on September 15 or dividends due to be paid to preference shareholders on October 15.
Chief executive Kerry Finnigan said the company had hoped to keep paying interest until the capital restructure plan was agreed. But its trustee Perpetual Trust had requested it stop making payments now in the interest of being fair to all security holders.
Finnigan would not say how much money was being held back but said part of the problem was because some investors were paid out the interest and others had it compounded.
"If we are paying out interest are we being fair to those who want their interest compounded?" he said.
Finnigan said the problem had also been exacerbated by delays in signing off a management buy-out. "We had hoped to have the deal done and dusted by now."
Finnigan and a consortium of management, including director and former All Black Jock Hobbs, reached a non-binding agreement to buy back the business from Australian investment company Allco Hit in July with the help of Bank of Scotland International.
They planned to have the deal finalised by the end of September but were forced to renegotiate to include a corporate restructure last month after BOS got cold feet over the recent number of property finance company collapses.
Finnigan said he was hoping to have the capital restructure plan finalised in the next two to three weeks although there was likely to be some changes made to its initial proposal.
The initial proposal includes debenture holders being paid 30 per cent of their investment in three instalments starting from March next year. The rest of it would be converted to three, four and five-year bonds. But the company will have to pass through two votes before it can move forward.
The first, on October 23, will allow Allco Hit shareholders to vote on the sale of the business to the consortium while the second will see its New Zealand investors given a chance to approve the capital restructure. The sale depends on the second vote getting the thumbs up.
Since it had frozen redemptions, Finnigan said the business had gone through an audit which had allowed all parties to assess the financial situation of the company. "We are making good progress but clearly we would like to be making it quicker."
Those in a position to sign off on financials were nervous because the company was in the property finance sector, Finnigan said.
But it was committed to making the interest and dividend payments as soon as possible after it had signed off on the sale agreement and the capital restructure. "It is disappointing for investors not to get their money," he said.
"But we are not avoiding that commitment. It is at the forefront of our minds in working through this."
The strategy
* Strategic Finance capital restructure plan to be completed within 2-3 weeks.
* Allco Hit shareholders to vote on sale on October 23.
* New Zealand investor vote held after that.
