KEY POINTS:
Cynotech Holdings is buying the loan receivables of Western Bay Finance, which went into receivership in August 2006.
Cynotech chairman Allan Hawkins said today that the receivables book had been sold after the receivership to a group of investors.
Now Cynotech had arranged to buy the receivables not yet collected.
The face value of the receivables bought by Cynotech was $30 million, while the purchase price of $1.5m was to be settled by a cash payment of $1m and the issue of 3,125,000 Cynotech shares at an issue price of 16c.
"The quality of the Western Bay receivables as they now stand is not good, but the directors of Cynotech are confident that the experienced credit team within the group will be able to collect a significant amount of the receivables still outstanding," Mr Hawkins said.
In late 2006 Cynotech had bought the loan book of another company in receivership, National Finance 2000, and had so far collected around half of the amount paid to acquire those receivables.
Collections on the National Finance book continued to increase month by month as court actions took effect and missing debtors were traced, Mr Hawkins said.
The directors regarded the National Finance purchase as a success and the systems and staff experience gained would help in collecting the Western Bay receivables.
Cynotech had also arranged to buy another salvage ledger from a motor vehicle group, with a face value of about $1m for a nominal payment of $50,000.
In a further move, Cynotech had completed the purchase of receivables totalling $5.7m from a part of the Capital + Merchant Finance Group.
Those receivables were performing loans and provided an ongoing business stream in motor vehicle dealer financing.
In summary, for a total outlay of around $8m, the face value of receivables managed by the Cynotech Group would double from the $30m managed at the end of December, to a new level above $60m, Mr Hawkins said.
Shares in Cynotech closed at 15c yesterday, having ranged between 28c and 12.7c in the past year.
- NZPA
