KEY POINTS:
As inevitably as night follows day, Nathans Finance has been placed into receivership.
Yesterday the Stock Exchange suspended trading in Nathans' parent company vending technology company VTL Group, after it announced it was insolvent due to a Companies Office investigation of Nathans.
Nathans' receivership was announced today by
Perpetual Trust Ltd, trustee for the debenture stock issued by Nathans Finance.
John Waller and Colin McCloy, partners at PricewaterhouseCoopers, had been appointed as receivers, Perpetual said.
Perpetual Trust chief executive Louise Edwards said Perpetual had been looking closely at the company and had been conducting its own investigations into the position of VTL and Nathans alongside the Registrar of Companies.
Perpetual had also recently questioned an announcement made to the NZX on July 27, stating VTL's intention to sell its United States vending business assets to Bacon Whitney Corporation, she said.
Initially, Perpetual Trust was advised this transaction would result in a significant cash injection for VTL, effectively reducing Nathans' loan portfolio exposure to VTL and boosting the company's financial position.
It turned out that Bacon Whitney was providing VTL a convertible note to purchase the US assets, not cash, and that Nathans would be funding that transaction.
"This could have potentially caused Nathans' position to deteriorate, rather than improve," she said.
Perpetual was to have held emergency meetings with Nathans Finance this week.
But on Saturday the Registrar of Companies declared Nathans "at risk".
"Being declared 'at risk' is a breach of Nathans Finance's Trust Deed. Nathans is also now not solvent."
After further discussions with the company, and as a consequence of VTL declaring itself insolvent and ceasing to trade, there was no alternative but to place Nathans into receivership, Ms Edwards said.
Nathans Finance, which has raised $150 million from debenture investors, lent the bulk of its debenture money to VTL.
The most recent Nathans prospectus shows loans to VTL of $79.6 million, which fell due on June 30.
VTL said in a statement yesterday that it had to cease trading because the "at risk" declaration would lead to a lack of confidence in Nathans from which, "in the current climate", it would be hard to recover.
There were also "issues of VTL's financial viability". It had just received a draft report from the registrar's investigation into VTL.
As a result, VTL did not think the sale of its US franchise assets to Bacon Whitney Corporation would be able to proceed to shareholder approval.
Matters for Nathans came to a head on Saturday when the registrar ordered it to place any investment money it received in a trust fund.
The company was also ordered not to shift any funds without the registrar's approval.
VTL said in yesterday's statement Nathans would immediately withdraw its prospectus.
The collapse of Nathans follows finance company Bridgecorp last month being put into receivership, after defaulting on repayments of some term investments due to investors.
- NZPA
