Liam Dann: Trustee's quick action a stark contrast to other collapses

Photo / Brett Phibbs

The speed and decisiveness with which the trustee called in receivers to take control of St Laurence is sensational.

Unfortunately it also provides a stark contrast to the lack of action from trustees in relation to the worst of the finance companies over the past few years.

Wednesday's ultimatum from the St Laurence board had an all too familiar ring to it. Here was the board of a finance company - which had previously convinced debenture holders to vote for a moratorium plan as an alternative to receivership - once again trying to dictate terms.

Investors were told they needed to accept a complicated plan, which would have seen them become shareholders of the company, or face receivership.

Had that gone to a vote the board would no doubt have lobbied hard to convince investors that they had no choice - accept or face financial oblivion.

The response from the trustee was swift.

Just hours after the St Laurence letter went out, Matthew Lancaster, head of corporate trust for Perpetual Trust, put out a release saying that not only had the trust not authorised the board plan, it had specifically told the board not to take it to investors.

He also made it clear that the proposed plan would have released St Laurence managing director Kevin Podmore from personal guarantees he had made with regard to the company. Then on Thursday, Perpetual Trust called in receivers.

In doing so it could be argued that it has taken the choice out of the hands of investors. But it could also be argued that it has done so in much the same way as a parent vetoes a child's choice to play with matches.

It remains a mystery quite why debenture holders have been so loyal to those finance company bosses who have led them in to financial distress - voting overwhelmingly for moratorium plans and equity deals.

Presumably it is out of a sense of desperation and a hope that they'll turn things around over time. But time is not on the side of the kind of commercial property investments that distressed finance companies need to offload.

There is no flood of Asian money hunting bargains in this sector. The Chinese want productive farming investments and with prices in Europe falling through the floor the global market for tourist and lifestyle developments is going to be depressed for some time yet.

If trustees feel management of these failed companies are living in a dream world then they need to act. Perpetual Trust to its great credit appears to be taking a tougher line with the companies it oversees. It was also decisive in putting Strategic Finance in to receivership back in March. If we accept there has been a systematic failure to protect investors over the past few years then we must now start acting as if we have learned something.

We are seeing that with the Securities Commission. We are seeing that from the Government which this week moved to fast-track the creation of a super regulator for the finance sector.

It's a good start. These are small but important steps on the road to restoring investor confidence.

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