KEY POINTS:
Auckland-based investment firm Clegg & Co Finance has been placed in receivership - the 10th in a string of finance company failures.
The collapse exposes about 500 investors, who have $15 million tied up in the Parnell company.
The blow came as investors in Five Star Consumer Finance,
which failed in late August owing about $60 million, were told to expect 26c to 40c of every dollar owed to them.
The collapse of Clegg & Co comes two months after the company assured investors it was safe.
The Herald has obtained letters from director Brian Clegg to investors, written under a Classic Finance letterhead, dating back to August 28.
He writes about the publicity surrounding the collapse of finance companies, but believes his company is one of the "safe" ones, because it was "still operating profitably and successfully in accordance with our lending policy", and had kept out of high-risk lending.
"We are certain we will weather this difficult time regardless. You can be confident in the knowledge that your deposit is secure with us."
He followed it up with another letter on September 5 advising of plans to ride out the financial storm, including postponing newspaper advertisements.
"The response to advertising in the present financial marketplace is currently nil and the cost not justified, so please do not take our decision to suspend advertising as anything other than saving costs at this time."
Mr Clegg also advised that the company's latest prospectus was due from the printer, and that it was increasing its interest rate from 10-10.4 per cent to 10.5-10.9 per cent.
On October 1 he wrote to investors advising liquidation, citing the company's inability to pay debts.
Ten finance firms have collapsed in the past 17 months, owing investors about $1.2 billion.
Meanwhile, investors in Five Star Consumer Finance were dealt a blow with news they can expect a meagre return on their money.
Richard Agnew and Anthony Boswell of PricewaterhouseCoopers said they had arrived at the 26c to 40c range following their preliminary review of the company's assets, and nothing was likely until December.
Five Star was predominantly a consumer finance operation with a lot of relatively small loans. It was the Retailers Association's preferred hire purchase finance provider.
It had a total of 11,194 loans with a book value of $65.52 million.
