KEY POINTS:
Finance company MFS Boston has staved off receivership after receiving approval from its debenture investors to wind down the business through a 20-month moratorium.
Yesterday, its 1700 investors were asked to allow the company to freeze redemptions and attempt to return the $38.5 million borrowed from them in the form of quarterly instalments.
MFS Boston, which is an indirectly-owned subsidiary of troubled Australian investment company MFS, announced plans to hold the vote last month.
It had not defaulted on payments but said it could see a point in time when its debenture maturity levels would be higher than its loan repayments.
At the time, the company had 32 loans of which only one was in default. Yesterday it said the number of loans had reduced to 30 for an amount of $41.1 million.
The company is hoping to return all of the money it borrowed to investors with interest of 9 per cent.
Director Adrian Green said it was with real regret that the company proposed the moratorium but following dramatic changes in the financial markets, the company's current business model was no longer sustainable.
He said the company was entering into the moratorium with the support of both its trustee Perpetual Trust and insolvency specialist Korda Mentha and the decision to try to avoid receivership was driven by cost.
"If a receiver is appointed there are enormous costs while they get to know the business. Those can mount up exponentially and can be astronomic."
Whangarei investor Murray Archer asked when key loans were due but was rebuffed by Green who said there was no point in naming the dates when there was already uncertainty around the loans.
"I understand - but if they don't pay, this moratorium won't succeed," Archer replied.
Green agreed but said the company had a buffer - a $6 million cash surplus - so borrowers would have to default by more than that amount for the moratorium to fail.
MFS New Zealand chief executive Jason Maywald, who was not due to speak at the meeting but appeared as a director, was also questioned over what was happening to the Australian company, whether he was expecting MFS to "cut loose" its directors and if MFS Boston's money could be taken by the parent.
Maywald said MFS Boston's accounts were totally separate and MFS would not be taking any money until investors had been repaid their principle and interest but was less sure of the parent's position.
Provided everything goes to plan, MFS Boston investors will receive their first payment mid-June of $5 million, with a further $11 million after August 31 and $14 million after November 31.
Green said it hoped to pay 77c in the dollar before Christmas.
More than 300 MFS Pacific Finance investors are still waiting to hear what agreement owner MFS New Zealand has reached with MFS over their moratorium proposal.
