Trustee says 'clear case' for removal of managers in interests of investors
A trustee yesterday moved against one of the country's largest property businesses, putting it into receivership.
Finance company St Laurence, which owes 9000 investors $245 million, had proposed investors take a shareholding in the company as an alternative.
But yesterday Perpetual Trust appointed Barry Jordan and David Vance of Deloitte as receivers.
That move overtakes the 2008 vote by investors to put St Laurence in moratorium and drip-feed small sums to investors by terms stretching into 2021 and 2034.
Managing director Kevin Podmore, who is paid $450,000 annually, had said on Wednesday that St Laurence was running out of cash. He suggested investors swap debt for equity to save it - but that could have seen the same team in charge.
The St Laurence board this morning issued a statement saying it was "disappointed" that Perpetual Trust had appointed a receiver.
"The Trustee has substituted its view for those of the investors in respect of the investors' own money," said Podmore in the release.
"Perpetual has declined to give us reasons for its decision and did not consult with us as to the likely value outcomes for investors before making it," he said.
"We are extremely disappointed that the Trustee has deprived investors of the opportunity to decide themselves on whether our proposed debt for equity swap plan is in their best interest. The letter we sent to investors yesterday was neither misleading nor did it require Trustee approval. The Trustee should not suggest otherwise."
Podmore said the directors still believed the plan it intended to put to investors in June would provide a better result for investors than receivership.
"Investors still have the right in a meeting to change the Trustee's decision if investors consider that appropriate."
Podmore said he would "of course cooperate with the receiver because our commitment remains, as always, to maximise investors' recovery,"
Perpetual's Matthew Lancaster yesterday said receivership was the better option.
He said St Laurence's announcement to investors did not have the required authorisation of the trustee.
"We had expressly stated in a conversation with the managing director Mr Podmore that it should not be sent."
He added that he wanted Podmore out.
"Under the debt-for-equity swap which relocated investors into a new company the existing management would have remained in place," Lancaster said.
"St Laurence's proposal provided no certainty that the very disappointing performance of the company in the recent past would improve. The new company would still need to borrow to trade which would further dilute value for existing investors.
"After all, St Laurence is insolvent. The proposed debt-to-equity swap in itself does not solve this; it is simply a device to give management another chance, and to do so free from trustee supervision."
He said there was also no certainty that the shares issued to investors would have a market, "just further uncertainty around whether, or when, investors might receive further payments".
"None of these aspects of the proposal were satisfactory to us.
"It is important to explain that the company has not been fully open with the trustee in the manner in which they have acted. In addition to sending an investor update letter with the company's own proposals that was not approved by the trustee, they have also not been able to provide the trustee with the McGrath Nicol report they commissioned, nor of any report from Grant Samuel despite referring publicly to each yesterday."
Lancaster said the company had also failed to provide proper up-to-date information on the present value of the assets of the guarantors.
"This is a very clear case where the interests of stockholders will be served by removing the current directors and management from the process of recovering monies for investors," he said.
The receivers have taken control of the company and its assets and will begin preparing a report for investors and the trustee, expected within six to eight weeks.
Rowland Crone, a Paraparaumu investor owed $20,000, was delighted with the trustee's move. "Good on them. It's important to get independent people in there,"
Crone said he had had little confidence in the existing situation.
"I think there might be only 20 per cent there for the investors."
- ANN GIBSON / NZ HERALD STAFF
