Commission warns on 10c-in-dollar Strategic bid

Securities Commission chairwoman Jane Diplock. Photo / Martin Sykes

The Securities Commission and Perpetual Trust yesterday warned Strategic Finance investors to be wary over an anonymous offer of 10c in the dollar for their debentures in the troubled finance company.

The warnings were issued yesterday as the Christchurch law firm representing mystery bidder Marchmont Securities Trust again refused to divulge who was behind the offer.

Securities Commission chairwoman Jane Diplock yesterday said Strategic Finance debenture holders should be wary of Marchmont's offer, especially given it was well below the face value of the debentures.

"When a finance company is in moratorium it is very difficult to accurately assess the value of the company's debentures. The debentures are not trading on any organised market, so there is no market price against which investors can assess the offer.

"Offers to buy securities for a fraction of their face value can be opportunistic, and play on doubts about the value of the debentures.

"We urge investors to seek advice from a reputable financial adviser."

Strategic's trustee Perpetual Trust also described Marchmont's offer as opportunistic. "We believe the offer takes advantage of the present uncertainties that exist concerning Strategic's future," Perpetual's Matthew Lancaster said.

"Perpetual considers that the Marchmont offer is likely to seriously undervalue the amount of each investor's investment in Strategic."

Lancaster said Marchmont's offer gave no certainty about when investors might receive payment once their investment had been transferred.

Investors who accepted the offer could also receive less than 10c in the dollar if Strategic made a payment to debenture holders before the transfer of securities was registered.

Perpetual's negotiations with Strategic over its future after the finance company missed a moratorium payment early this month were progressing and an announcement was expected shortly, said Lancaster.

"Investors should seek good advice before accepting the Marchmont offer at this point in the process."

Meanwhile, responding to the Business Herald's emailed questions yesterday, Amy Hutton of RA Fraser & Associates said her firm was required to keep the name and details of Marchmont's trustee confidential.