KEY POINTS:
Nearly 4000 secured debenture investors in Lombard Finance and Investments (LF&I) are likely to receive less than half of their $111 million investment, and no interest, receivers said today.
However, another 540 subordinated and capital note investors owed a total $14.1m were likely to receive nothing, PricewaterhouseCoopers partners John Fisk and John Waller said in a letter to investors.
In April, Lombard Group, which is not in receivership, said its finance company had hit funding problems on its lending in the property market.
Lombard Finance was placed into receivership with $127 million of debenture stock and notes on behalf of about 4400 investors, and a loan book of about $137 million.
"Our preliminary estimate indicates that LF&I secured debenture investors could recover between 21 per cent and 44 per cent of their original investment from the assets of the companies," the receivers said.
"No interest will be payable.
"We emphasise that there are still considerable uncertainties relating to the recoverability of the property loans which will have an impact on the final recoveries paid to secured debenture holders."
One of the developments on which Lombard Finance had lent substantial funds needed further funding and the level of recovery was uncertain.
The receivership also applied to three other subsidiaries - Lombard Asset Finance Ltd, Lombard Property Holdings Ltd and Lombard Asset Finance No 2 Ltd.
Out of assets totalling $143m, the companies under receivership had net assets of almost $16m.
Lombard Finance's main asset was a property loan book valued at $136.8m over 27 loans, most of them either bare land subdivisions or development properties in various stages of completion, the receivers said.
Provision for doubtful debt of $800,000 was significantly understated, and substantial further provisions were needed.
Of the loans, nine were first ranking security, 11 second-ranking, and one third-ranking.
"We are working with a number of stakeholders to recover these loans. However, it is clear that this will be a complex, costly and time consuming exercise," the receivers said.
Other assets included a $2.9m residential property in Auckland being sold, and a $2.7m commercial loan book of 171 loans including hire purchase, consumer and business loans which the receivers were considering selling.
The receivers had restructured management, letting go the executive director but employing four staff, as well as specialist property and legal advisers.
The receivers said they would inform government authorities of any potential breaches of legislation or Lombard Finance's trust deed.
The receivers expected to report back to investors by the end of August with a clearer idea of the amount and timing of returns.
- NZPA
