Who wants money from FE Investments: liquidation follows receivership

List of creditors out in first liquidators' report. Photo / Kenny Rodger

The first liquidators' report of Auckland-headquartered financier FE Investments shows total liabilities of $55 million and a creditors' list which includes a Government department and a number of publishers.

Rees Logan and Rhys Cain of EY have been appointed liquidators of the business which went into receivership four months ago during level 4 lockdown.

The first liquidators' report just out showed Personal Properties Securities Register creditors are Trustee Executors, CSG Finance, Ricoh Finance and ASB.

The Ministry of Business, Innovation and Employment is listed by the liquidators as an unsecured creditor, along with NZ Post.

On April 2, the Herald reported how FE Investments was put into receivership, with KordaMentha's Neale Jackson and Brendon Gibson of KordaMentha appointed.

FE Investments is an ASX listed business whose chief executive is Marcus Ritchie of Sydney. Ritchie is also a director of the New Zealand-registered FE Investments, along with Auckland's Jacob Ploeg and Andrew Schnauer.

The New Zealand business is wholly owned by FE Investments Group in Sydney, Companies Office records show.

Ploeg and Schnauer are listed as an unsecured creditor along with the Chinese Herald, Chapman Tripp, Chinese Times, Crown Worldwide (NZ), Deadline Express Couriers, Eftpos Warehouse, Equifax, Express Virtual Meetings, Interest.co.nz, Intersoft Systems, Land Information NZ, LNP Audit and Assurance, Maxima, McCorkindale Computer Solutions, NZ Federal, Packaging Recyclers, PKF Partners, Propella Software, Refinitiv (Thomson Reuters), Ricoh, SecureCom, SieTec Wholesale Networks, SmartPayroll, Stace Hammond, Sulco, The Cleaning Company, Trustee Executors and Venkitasubramanian.

The liquidators said that is the list known to them at the date of their report. They are not proposing to hold a creditors' meeting but have issued a form for those claiming money to complete and submit.

The total loan book appears as an asset on the books at $64.8m while term deposit holders are listed as being owed $54.6m.

Accounts show the company had loaned money on two huge Auckland hotel projects. FE Investments, the ASX-listed business, gave details of that in its interim financial report for the half-year ended September 30, 2019.

But both projects seemed extremely slow to begin to be developed.

They were:

• 201 Hobson St (Hobson Project 201)

"The hotel development is a prospective 108-room four-star hotel located at 201 Hobson St, Auckland. Resource consent was issued in November 2017. Additionally, the company has received an offer of a fixed-price construction contract with a major NZ construction firm. The contract is expected to be signed in December 2019. Construction is expected to commence early 2020 and targeted be completed by December 2021," the company said.

• 29 Anzac Ave (A29 Holdings)

"The hotel development is a prospective 176-room four-star hotel located at 29 Anzac Ave, Auckland. Resource consent was issued in 2018. Discussions with an international hotel operator are in progress and a final agreement with that hotel operator expected imminently. Once the operator has been engaged, then final design will be completed.
Construction is assumed to commence late in quarter 1, 2020 and to be completed by December 2021," FE Investments told the ASX.

As of late last year, both the sites were cleared for development and FE Investments had loaned $49m on the properties, with those loans secured against the real estate titles, it said.

"The two hotel developments are in central Auckland and at the reporting date both are cleared sites ready for development," the accounts said.

"The loans are secured over these developments. The gross loans associated with the key Individuals, of which there are two borrowers per project, total $49m-$28m is offset by syndication to co-lenders on a non-recourse basis," the accounts said.

The worst-case scenario was even contemplated last year.

"If the hotel projects are not completed or commenced, there would be significant financial loss," FE Investments said.

One worried depositor told the Herald in April he had hundreds of thousands of dollars with FE Investments. The term deposit was due to expire and he would get his money with substantial interest but he feared the worst.

"My main question is how much can I expect to get back but maybe there are some bigger questions for government," he said. Smaller finance companies deserved support, he said.

"I knew FEI were struggling," he said, referring to media coverage late last year.

"So I planned to reduce my exposure as soon as my term deposits expired. But that wasn't going to be until later this year and I guess Covid-19 was too much of a hit for them on top of their existing issues," he said.

One person close to the collapse said while the pandemic had not caused the problem, nor had it helped. Issues were building for some time before the pandemic and this week when receivers were called in

The Financial Markets Authority said in April it had been notified of the receivership of the financier which had been unable to meet the minimum financial requirements under its trust deed, or its Reserve Bank licence as a non-bank deposit taker.

"The FMA understands this will be difficult for FE Investments investors, but the appointment of a receiver will ensure an orderly process and protect the interests of all investors in the business. Receivers have been appointed by the company's supervisor, Trustees Executor," a statement said.

Liam Mason, FMA director of regulation said in April: "This is terrible news for the investors in this troubled non-bank deposit taker. FE Investments has been in difficulty for some time following a number of business setbacks. Its problems were not caused by Covid-19, but there's no doubt the current economic conditions have made matters worse."