Government liable for $7.3m in failed finance co

Nick Wevers, in a 2004 photo taken during his time as chief executive Blue Chip. Photo / Paul Estcourt

The Government says it will guarantee $7.3 million, or the bulk of investors' deposits, in failed Auckland finance company Viaduct Capital.

Viaduct Capital put itself into receivership yesterday. McDonald Vague has been appointed receiver.

Colin Wilson, of Prince and Partners Trustee Company, which was asked by Viaduct Capital to appoint the receivers, said the move was to "protect the interests of investors through an orderly realisation of the company's assets".

Viaduct has about 110 depositors and about $7.8m in deposits. About 93 per cent, or $7.3m, is covered by the Government retail deposit guarantee scheme, with the balance of $500,000 unguaranteed.

In April last year the Crown kicked Viaduct Capital off the scheme but said deposits made beforehand would continue to be covered.

Treasury director of financial operations Brian McCulloch said today the appointment of receivers triggered the Crown's guarantee.

Treasury will contact eligible depositors in about six weeks with information one how to claim under the terms of the guarantee scheme, he said.

"The Crown stands fully behind its guarantee commitments, and we expect an orderly process of payment to eligible Viaduct Capital depositors."

It was important to remember that it is the eligible depositors that are guaranteed rather than the company, said McCulloch.

Treasury cut Viaduct from the guarantee scheme over concerns that Paul Bublitz's Hunter Capital Group (HCG) may have benefited from the guarantee in a manner unintended by the Crown. HCG lent Viaduct shareholder Phoenix money to enable it to buy Viaduct.

It was reasonable to take the view that the transactions surrounding the purchase of Viaduct appeared to have been designed primarily to advance the interests of Mr Bublitz, Treasury said.

Viaduct Capital was formerly known as Priority Finance. Former chief executive Nick Wevers, who stepped down in September, used to be chief executive of failed property investment firm Blue Chip.

- NZPA