Low-ball offer for Strategic investors

Strategic Finance chief executive Kerry Finnigan. Photo / Supplied

A mysterious trust called Marchmont Securities is offering to buy Strategic Finance debentures for a fraction of their face value.

The Business Herald yesterday heard from a reader whose elderly mother had received a letter from Marchmont Securities Trust offering to buy her Strategic debentures for 10c for every $1 of face value.

The offer, which is being managed on behalf of Marchmont by Christchurch law firm RA Fraser & Associates, has similarities to a number of unsolicited low-ball offers to Australian and New Zealand "mum and dad" investors in listed companies by infamous Australian David Tweed.

The reader was concerned by the fact that Marchmont had obtained her mother's contact details and the amount of cash she had invested.

Her mother had subsequently been contacted by her financial adviser, who instructed her to ignore the offer.

The low-ball offer had nevertheless irritated the reader.

"I'm concerned for my mother's survival, she's in a rest home and needs her money to work as hard as it can."

Another Strategic investor who received the offer, John Reckin, said Marchmont was clearly trying to take advantage of the unfortunate and uncertain situation he and other Strategic investors, owed about $325 million, were in.

Strategic is in moratorium and missed a scheduled payment to 15,000 retail investors this month. It is currently in negotiations with its trustee about its future.

Reckin had been relying on his savings with Strategic to help cover the costs of caring for his wife, who suffered from muscular dystrophy.

He said he was curious to know who Marchmont were and what they knew about Strategic's prospects.

"They've obviously covered their tracks but they must be in a situation to know what Strategic Finance is capable of recovering at the end of the day. People like me don't."

Strategic Finance chief executive Kerry Finnigan told the Business Herald investors' names and contact information were supplied to RA Fraser & Associates after a request under the Securities Act with which Strategic was obliged to comply.

In a letter to investors posted on its website yesterday, Strategic said the information was provided "on the basis that it was not to be used to either solicit business, or to communicate with our clients in a manner which could give rise to a breach of the provisions of the Privacy Act1993".

Strategic said it knew very little either about Marchmont Securities or who was really behind this offer.

"The board of Strategic Finance Ltd wishes to make it very clear that it had no knowledge of such an offer and does not endorse or support it in any way."

The Securities Commission's head of primary markets, Kathryn Rogers, yesterday confirmed that finance companies are obliged to provide a register of investors on request and while investors had the protection of the Privacy Act, she said there was nothing to stop third parties using the information to solicit business.

RA Fraser & Associates partner Amy Hutton told the Business Herald her colleague Michael McDonald, who was dealing with the offer which closes on February 3, was on leave in America for a month.

Hutton said there was "no mystery" over who was behind Marchmont but refused to answer any questions at all unless they were in writing.

She had not responded to the Business Herald's emailed questions by deadline yesterday.

In its letter, which urges investors to "sell your Strategic Debentures now" in large type, Marchmont says it is willing to purchase Strategic Finance debentures with a face value of up to $5 million on a "first come, first served basis".