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Capital + Merchant investors who got in through financial advice firm Vestar may be headed for disappointment, despite promises by Vestar's owner MFS that it is committed to ensuring clients "do not suffer any capital loss".
MFS New Zealand, which manages Vestar on behalf of its Australian parent company, wrote to Vestar clients this week to reinforce its commitment to investors and reassure them of the level of support available through being part of the MFS group of companies.
"By this letter, we wish to inform you of MFS's commitment to ensure that Vestar's clients do not suffer any capital loss in relation to the receivership of Capital + Merchant," it stated.
"At this point in time we are examining the extent of the issues relating to Capital + Merchant, and once we understand more about their situation we will provide you with further details. However, regardless of the outcome of any receivers' report in relation to Capital + Merchant, our commitment to you will remain."
The letter did not state what form the commitment would come in or what timeframe it would be delivered by.
But it went on to add that while it was making a commitment, it would not be "in the form of compensation".
The Business Herald understands that any commitment to Vestar's investors is unlikely to be in the form of a cash payment but in the form of a "proposal".
MFS has previously said it would be putting together a proposal for Bridgecorp investors.
MFS New Zealand CEO Jason Maywald was not available for comment but it is understood that the company does not yet know what form a proposal for either Bridgecorp or Capital + Merchant would take.
However, the company said it remained 100 per cent committed to ensuring its clients would not suffer a capital loss.
The words capital loss could imply that the company would somehow make up the difference between what investors get back from the receiver and their capital investment.
But this appears to be far from guaranteed. The Business Herald understands the letter does not constitute a legal agreement to ensure investors do not have a capital loss.
Even if investors get back the money they originally invested through Vestar, they could still be at a loss because they would not have received any income from their investment since either Bridgecorp or Capital + Merchant collapsed.
It could also be years before either of the companies' receiverships are finalised, meaning that investors will miss out on potential returns from their investment and any money they do get back will be eroded by inflation.
An MFS representative said the letter was aimed at reassuring clients to let them know that the company had a genuine desire to do everything it could for them.
