KEY POINTS:
Auckland-based financier Compass Capital is reassuring brokers and investors that Bridgecorp's failure will have no effects on its business which it says has the ability to grow to a $100 million fund.
Compass, a mortgage trust, was established a year ago and its ultimate beneficiary is Bridgecorp, meaning that any profits after it has paid its investors and management fees go to the failed finance company.
Bridgecorp receiver Colin McCloy of PricewaterhouseCoopers yesterday confirmed Compass was outside the Bridgecorp charging group.
"It does not form part of our receivership."
Nevertheless, he and Waller had spoken to Compass' directors, "and we're working closely with them".
In the last week, Bridgecorp Holdings' finance director Rob Roest has resigned from the Compass board.
Ian Gladwell, a director of Compass and its fund manager, said yesterday the company was in great shape, with the ability to raise loans of up to $100 million.
"The repayment of the principal amounts of all the company's loans is 100 per cent insured by syndicates at Lloyds of London.
"The Lloyds policy allows us to go up to $100 million of lending," Gladwell said. Compass had also severed ties with Bridgecorp after that company went into receivership last Monday.
Gladwell said he would join Shortland Chambers barrister John Moody on the board.
"Compass is not a lifeboat for Bridgecorp," Gladwell said.
Bridgecorp owes 18,000 retail investors about $500 million after failing to make loan payments but Gladwell said Compass had a bright future and had already taken a number of steps to distance itself from Bridgecorp.
He wrote to financial and investment brokers this week who he said were being questioned by their investors.
These brokers had advised their clients to invest with Compass, Gladwell said, and were being reassured that Compass was in good shape.
"Compass Capital has terminated Bridgecorp's appointment as administrator of the Compass loan portfolio and the New Zealand Guardian Trust Company has accepted a request from Compass to act as the new administrator," Gladwell wrote to brokers.
"Compass Capital will be managed by a new management company, Compass Capital Management."
The directors of Compass are in the process of preparing amendments to the Compass prospectus and investment statement to describe these changes, which will be registered and made available to investors in due course.
Gladwell said Compass had raised $20 million from mum-and-dad investors. They had contributed amounts of $1000 to $200,000 each and their funds were well invested, returning 9 per cent, he said.
Compass has loans on six residential and leisure property development projects: a Lake Hayes residential subdivision, on a Te Atatu South townhouse development, for a Mangawhai residential subdivision, on a Bay of Plenty golfing resort, on a Tutukaka hotel project and a townhouse development in Blockhouse Bay. Compass Capital was set up a year ago and is fully owned by the New Zealand Guardian Trust Company, which acts as a trustee for Compass Capital Trust. The beneficiary of Compass Capital Trust is Bridgecorp.
Compass has a four star "investment grade" rating from Property Investment Research, the same independent Australian agency that had a 3 1/2 star rating on Bridgecorp right up until the company folded.
Kapiti Coast sharebroker Chris Lee said Bridgecorp had sold its "best loans" to Compass.
"It's an exaggeration to say Compass is going from strength to strength. It was formed to help Bridgecorp find a way of being liquid," he said.
"Compass will be seen as a minuscule sideshow compared to Bridgecorp and the chance of Compass continuing to grow and succeed will not have been hurt by Bridgecorp's demise," he said.
"If Compass can go out and buy good loans from a better arranger than Bridgecorp, then that will help the company become credible."
