Investors face slow payback

Photo / NZ Herald

Investors who put their money into Government-guaranteed finance companies which then failed have waited months to get their cash back.

Five companies covered by the guarantee have failed since it was set up in October 2008.

The first company to collapse was Mascot Finance in March last year, followed by Strata one month later.

Treasury won't say how long it took to repay those investors but a spokesman said it had learned from its experience and had since changed its processes.

"Repayment of depositors with both Mascot and Strata was managed with a manual process that couldn't easily be scaled up or down to fit the size of the defaulting company or to allow for several defaults happening in quick succession.

"We learned from Mascot and Strata and altered our process for future defaults, including Vision Securities, Rockforte Finance and Viaduct Capital."

Treasury now has a nine-step process it follows. But it can still take several months for investors to have their money paid out.

The first group of Vision Securities investors, which were told the company had failed on April 1 this year, received payment on Friday.

The Treasury spokesman said every default was different so the time it took to repay investors could be different for each company.

"There is no fixed period for repayment, but payment to eligible creditors will be made as soon as practicable once we receive a correctly completed notice of claim and have assessed eligibility and the proper amount to pay."

Treasury says delays are possible - particularly in the early stages of its process if it has to wait to get the information from the trustees and receivers.

"It is not unusual to find less-than-ideal record keeping and processes in companies that fail. When that happens, it can take the receivers, trustees and other parties involved a while to establish exactly what-is-what, who-is-who and how it all fits together. That inevitably means that the Treasury can't immediately get the initial information it needs to start the repayment process."

The spokesman said the repayment of Viaduct Securities investors had not taken long when compared to the processes for non-guaranteed finance companies such as Hanover, Strategic, Dorchester, Geneva and St Laurence.

The scheme:

* Began in October 2008

* About 100 financial entities are covered at the moment

* Current scheme expires on October 12

* Extended scheme begins from October 12 and ends on December 31, 2011

* Companies have to meet tougher requirements to get into the extended scheme

* Eight companies so far been accepted including Marac, PGG Wrightson Finance, Fisher and Paykel Finance and South Canterbury Finance