Strategic warns of $98m loss

Kerry Finnigan. Photo / Supplied

In-moratorium finance company Strategic Finance says debenture holders will still get all their money back despite its loan book souring further in the six months to June, prompting it to warn of a $98 million full-year loss.

The company said "along with all participants in the property and finance sector" it continued to be affected by the difficult economic climate and a number of other factors.

They included the continued decline of underlying property values, a high rate of defaulting purchasers of property subject to its mortgages and actions that prior-ranking lenders were taking to collect their loans over properties on which Strategic holds second or subsequent mortgages.

As a result, the company said it expected to make "significantly higher" levels of impairments, provisions and bad debt write-offs on loans in its June-year results.

"The increased level of impairment adjustments will likely result in Strategic Finance making a net operating loss after tax for the financial year to June 30, 2009 in the vicinity of $98 million."

This year the company reported a December-half net loss of $32.7 million.

However, Strategic said its auditors KPMG might review the level of impairments which could result in further adjustments to what will be published in the initial June-year results.

Nevertheless, it maintained that its debenture repayment plan, endorsed by investors owed $325 million in December last year, was on track.

"It is the board's assessment that the provisional full-year results have no impact on the forecast repayment of 100c in the dollar of principal and all interest to depositors, debenture holders or the prior ranking BOS International (Australia) Ltd facility."

Chief executive Kerry Finnigan told the Business Herald he was "as confident as anyone can be" about making repayments to investors.

When its moratorium was approved, Strategic said it planned to make quarterly payments starting from September this year. But in a May update to investors it said it would instead comply with repayment target dates set by its trustee under which it must pay no less than 9 per cent to stockholders by January 7 next year, although that includes a $25 million loan from Bank of Scotland International that must be repaid first.

Strategic also said yesterday that holders of about $21 million in subordinated notes would not receive any interest and would eventually be repaid only 85 per cent of their investment.