Finance company's records well in arrears

Colin McCloy

The receiver for failed finance company National Finance 2000 says 45 per cent of the company's loan book was in arrears.

In a report to the Registrar of Companies, receiver Colin McCloy said arrears totalled $12.4 million of the loan book which had a total balance of $27.4 million, or $20.1 million when unearned interest and write-offs and provisions were excluded.

Of the $12.4 million arrears, $9.3 million had payments which were more than 150 days overdue, $1.3 million were categorised as "Gone No Address", and $1.6 million of loans had been written off.

On May 9, the day receivers were appointed, the unaudited financial position of National Finance showed positive shareholders' funds of $56,000.

"However, on review of the quality of the assets, including the loan book and dealer advances, our view is that the loan book and dealer advances are materially overstated and therefore the financial statements should properly show a substantial negative equity position," the report said.

The receivers' view remained that secured debenture investors could receive between 30 per cent and 50 per cent of their original investment, while subordinated investors would receive nothing.

In light of the poor recoveries to investors the receivers had referred the events leading up to receivership to various authorities for investigation.

Mr McCloy would not say what those authorities were as the receivers did not want to prejudice investigations.

Today's report said that at May 9 secured debenture investors totalled $21.8 million, with subordinated investors $3 million.

On that day the book value of assets classed as dealer advances totalled $5.1 million, most to associated car business Payless Cars Companies.

All Payless Cars Companies were either in receivership or liquidation, and recoveries of advances were likely to be at a substantial discount to the $3.2 million book value, the report said.

"The Payless Cars Companies had suffered significant losses in the year prior to the appointment of receivers, had liabilities in excess of assets, and it was therefore determined that continued trading was not a viable option."

Some other dealer advances were to companies that had either been struck off the Companies Register, or were in liquidation.

Also some loans had been made to parties associated with National Finance 2000 and Payless Cars managing director Allan Ludlow.

"It is clear that based on the age of loans, documentation and the borrowing parties, recoveries will be at a substantial discount to book value as at 9 May 2006," the report said.

The receivers expect to be able to set out a likely timeframe for distributions to investors by the end of September

- NZPA