KEY POINTS:
The receivers of failed finance company Capital + Merchant Finance say they expect legal action against the company's former directors to go ahead after investigations by themselves and the Securities Commission.
Insolvency experts Grant Thornton were appointed to property development lenders Capital + Merchant Finance and Capital + Merchant Investments in November when the companies collapsed owing $188 million to 7000 investors.
In their initial report the receivers believed up to 59 per cent of the $168 million owed to debenture holders could be returned to them.
But yesterday they slashed the level to just 8c in the dollar, citing poor-quality lending in the group's loan book, a deteriorating property market and the lack of alternative credit to facilitate refinancing options.
The downgrade follows predictions made by second receivers Korda Mentha in May that debenture holders were likely to receive less than 10c in the dollar back.
Grant Thornton also said it had concerns about the appropriateness of a number of transactions entered into by the company before its appointment.
Grant Thornton's Tim Downes said he had received specific correspondence from the Securities Commission several months ago. Since then he had had several meetings with the commission and, while he did not know what stage their investigations were at, he confirmed the case was still live.
So far the receivers have been able to realise $42.8 million from 55 loans Capital + Merchant Finance had from a total loan book of $182.6 million.
Of that, $13.4 million has been repaid to Fortress. The remaining $29.4 million has been paid out to prior ranking security holders, mainly banks holding first mortgages, and for costs of the receivership. Downes said a further $8 million would be paid to Fortress before it would look at repaying debenture holders.
However, he said some good news was that he was more optimistic about the number of loans which could be covered by an insurance policy taken out with Lloyds of London and if a claim was successful returns to debenture holders could be boosted by a further 11 per cent.
BREAKDOWN
* 7000 investors owed $188 million.
* Only 8c in dollar return expected for debenture holders.
* The Securities Commission is investigating.
* Receiver has concerns about the "appropriateness" of some transactions.
