Boston goes into receivership

Boston Finance investors approved the moratorium plan in March last year. Photo / Paul Estcourt

Boston Finance has been put into receivership less than a week after it was supposed to have repaid all of the money it owed to investors.

The Auckland-based property finance business was one of the first to reach a moratorium agreement with its investors, in March 2008.

It promised to pay its 1300 investors all of their $38.5 million back as well as 9 per cent interest over a 20-month timeframe that was due to end on November 14.

But yesterday trustee Perpetual Trust decided to end the moratorium with just 37c in the dollar, or $14.24 million, having been repaid.

Perpetual Trust head of Corporate Trust Matthew Lancaster said the management of Boston had done as much as they could to realise the firm's loans and he believed it would now be cheaper for it to continue under the reins of a receiver.

"There will be a saving in management costs as well as avoiding the expense of calling another meeting."

Management had so far recovered money from 24 of the original 32 loans. Eight were still outstanding.

Lancaster said he remained of the view that putting the company into moratorium in March last year was the best option at the time for investors.

"A receiver would have had to come up to speed with all those loans."

Lancaster said he expected more money to come back to investors through the receivership but at this point the most they could expect was 70c in the dollar based on the written-down value of the eight loans.

But it won't be easy to get the money.

Of the eight, several are loans made to developers of apartments which were sold via the Blue Chip investment scheme.

Lancaster said they were subject to the ruling of High Court action so it was difficult to accurately estimate the timing and recovery of them.

The remaining five or so loans, which are of a lesser dollar value, were waiting for either the sale of the property or the repayment of the loan through other means.

Boston Finance director Kingsley Turner said he and remaining director Adrian Green were very disappointed the company had been unable to repay investors the 100 per cent promised.

"Everyone, including the advisers supported the view that it was realistic that we could get 100c in the dollar."

But Turner said the environment for property finance had changed dramatically since February 2008, when the moratorium was put together.

"In the second half of 2008 we had a major meltdown that has generally impacted on what anyone has been able to achieve in the last year."

Turner said the directors would not be resigning from the company and would continue to help the receivers KordaMentha to realise the remaining loans.

Boston Finance is a wholly owned subsidiary of Australian investment company Octaviar, formerly known as MFS, which is itself in liquidation.

Boston's sister finance company OPI Pacific Finance was also placed in receivership two months ago owing $256.8 million to more than 12,000 debenture and noteholders.

BOSTON FINANCE

* Moratorium began in March 2008.
* $38.5 million owed to 1300 investors.
* 37c in dollar paid back so far.
* Maximum 70c expected to be reached under receivership.
* Owned by failed Australian company Octaviar (formerly MFS).