Scant detail for investors in Orange Finance moratorium plan

Doug Somers-Edgar. Photo / Martin Sykes

Eight months after the company defaulted on repayments, investors in Doug Somers-Edgar's Orange Finance finally get to vote on a moratorium plan tomorrow, albeit one that contains little indication of the level or timing of eventual repayment.

The company's debenture stock investors, who are owed $23.2 million, will vote on the moratorium proposal on Friday at a meeting at the AMI Netball Centre in Takapuna.

However, documentation for the proposal offers little information on how much of their money they can expect to be repaid over its two-year period beyond an initial payment of about 15c in the dollar.

While the proposal details how interest has accrued on outstanding principal since the company ceased making repayments in December, and how it will accrue over the moratorium, this information is largely academic.

Somers-Edgar notes interest will only be paid once all principal has been repaid. "On current analysis it is unlikely that all principal will be repaid unless market conditions improve significantly."

The initial repayment, scheduled for August 21, should the plan be approved, will be partly funded from cash on hand along with $1 million Somers-Edgar and his wife will lend to the company.

Unlike debenture investors, the Somers-Edgars will receive interest on this amount.

Further repayments will be made quarterly and their level will depend on recoveries from the company's loan book.

The prospects for recoveries on Orange Finance's outstanding loans of $22.51 million - allowing for provisions of $680,000 and loan write-offs of about $6 million - appear dim.

Of the 18 loans in the book - all on property - 15 are in arrears. The remaining three loans mature before the end of the year "but on current indications are unlikely to repay on due date," said Somers-Edgar.

Somers-Edgar's company Matrix Funding Group will manage Orange during the moratorium and will receive a fee of $27,000 a month.

In line with its "usual policy" Covenant Trustee Company has not made a recommendation to investors as to whether the proposal is a good one for them, and KordaMentha, which will oversee the moratorium, offered no comparison of the proposal with receivership.

Orange ceased raising money from the public last August. It mainly lent funds for residential first mortgages, after raising debentures via Somers-Edgar's Money Managers financial advisory group from which he stepped aside in June last year.

Money Managers has attracted criticism for the way it channelled funds into investment products associated with itself and Somers-Edgar, including six trusts called First Steps, which closed two years ago owing 7000 investors $457 million.

Investors have received $223.5 million of their cash but last month First Step's trustee company Calibre Asset Services wrote to them warning of "significant challenges in realising the remaining assets".