KEY POINTS:
A 15th finance company has hit the wall and is asking its debenture holders to vote on a 20-month wind down to stop it from going to the receivers.
New Zealand property finance firm MFS Boston, an indirectly owned subsidiary of troubled Australian firm MFS, announced the moratorium proposal yesterday and will hold a meeting on March 14 for its 1700 investors.
Its decision to take a vote follows that of Geneva Finance which received approval for a six-month moratorium in November and MFS New Zealand subsidiary MFS Pacific Finance which proposed a stakeholder vote earlier this month after it failed to meet payments on $27 million in investments due to mature in January.
MFS Boston director Kingsley Turner said his firm had not defaulted on any payments but the company had foreseen a time when there would be a gap between its loan repayments and debenture maturities.
He blamed the situation on a combination of the problems in the finance company sector and the credit crunch.
"MFS Boston has been monitoring the changes in the finance sector over recent months. The financial environment has changed dramatically and a moratorium is now the best option for investors," the company said in a statement.
Turner said the company was confident investors could be repaid 100 per cent of their investments as well as interest and had sought independent advice from insolvency specialists KordaMentha which backed up its proposal.
Turner said the firm also had a strong loan book. It has 32 loans valued at $41.879 million, of which six are developments in progress. Only one loan, worth $4.3 million, is currently overdue.
The wind-down would see debenture holders paid back in quarterly instalments with principal paid first followed by 9 per cent per annum interest on their investment. But there are no guarantees that investors will get their money back.
Yesterday MFS Pacific asked for more time to put together its moratorium proposal. It initially said a meeting would be held in early March but now it is more likely to be at the end of the month.
In the statement to the stock exchange the directors said the process was taking longer than expected "due to the complexity of the issues involved".
MFS Pacific, which has 12,000 debenture holders with over $300 million invested, has a put option with MFS Ltd which means the Australian firm is liable for the debts but its own poor financial position has left it unable to bail out the New Zealand company.
MFS in Australia ran into problems in January when its share price plummeted 70 per cent in one day after investors became concerned about its debt levels. It has since sold off several parts of the business, including its travel arm, the Stella Group, to try to pay back its debts.
But yesterday it faced a setback after Australian investment firm City Pacific announced it had completed due diligence and decided not to buy any of the finance divisions of MFS.
MFS Pacific said it had obtained independent legal advice and based on that advice and the current negotiations with MFS it believed it was not in the best interests of investors to exercise the put option at this time. It did not explain why.
The firm said it still was not in a position to give an exact date for the moratorium.
THE FINE PRINT
* MFS Boston Finance has 1700 debenture holders owed $38.5 million.
* It has lent money to 32 borrowers for mortgages against New Zealand real estate of which six are still under development.
* The loans are due to be repaid in the next 15 months.
* It wants debenture holders to give it 20 months to wind down the company and pay them back.
* A debenture holder vote will be held on March 14 at North Harbour Stadium in Auckland.
