KEY POINTS:
Just a day after Property Finance was placed in receivership, yet another casualty - the seventh of the shakeout hitting the industry - will be announced today.
Richard Agnew of PricewaterhouseCoopers last night said he would be issuing a press release this morning advising of the receivership but
refused to confirm the name of the company.
"I want a chance to talk to staff before they read it somewhere," he said.
Earlier yesterday Property Finance Group said receivers Brendan Gibson and Grant Graham of Ferrier Hodgson had been appointed after Covenant Trustee Company turned down a restructuring plan tabled by the company's board and management.
Although it manages $630 million in loans, mostly residential mortgages, Property Finance has about $82 million in debentures on issue to about 4000 investors.
"The underlying quality of the company's assets should enable all debenture holders to be repaid in full," the company said in a statement.
"We are pretty gutted by it all," said managing director Darryl Queen.
"But we just need to now swing into gear and work with the receiver to maximise the result for all stakeholders in our group."
Queen also said there was no risk of the company's loans to homebuyers and other borrowers being called in.
"From a borrower's point of view it doesn't impact on them at all."
Queen said his company's problems stemmed from its inability to sell the mortgage backed securities it uses to fund the bulk of its lending because of the impact of the "credit crunch" on the relevant domestic and international markets rather than any drying up of debenture funds.
However, Hanover Finance chairman Greg Muir said the slowdown of new money coming into finance companies because of recent failures was resulting in a sharp decrease in crucial business investment as lenders sought to maintain liquidity.
"Significant parts of the economy require investment by non-bank players in order to make them operative - the property business, asset financing and small business financing."
Muir said Hanover and other leading finance companies had been "urgently" petitioning the Government to immediately introduce a regime under which companies could voluntarily comply with new regulatory measures, which at this point are not scheduled to take full effect until 2010. Those measures include mandatory credit ratings from a reputable international agency and minimum capital ratios.
"If that was made available to the market then the companies that fulfil those requirements, and from whom investors could get a lot of comfort, could opt in straight away," said Hanover chief executive Sam Stubbs.
Muir said: "The worst possible thing that I think the Government would want to see is a massive slowdown in investment across a range of sectors. That would be a tragedy for all concerned.
"There is a large core of very well run, highly profitable, competent organisations that are managing their books prudently and investors need a framework to be able to look through and find which of those companies are the ones they should be investing in.
"Until we have that it's our belief our sector will continue to suffer. The sooner the Government can move on this the better."
Hanover yesterday reported a June year net profit of $44.9 million, up 7 per cent on a year earlier.
In the last year, the company has gained a BB+ credit rating from international agency Fitch and diversified its lending across more sectors and geographical areas.
Stubbs said Hanover's loan book was "as good as its ever been" and the company, which has $960 million in total assets and $824 million in loans, had maintained cash reserves of $149 million.
Hanover was one of two big finance companies to report results yesterday.
The other was top tier firm South Canterbury Finance, which reported a June year net profit of $34.8 million, up from $26.9 million a year earlier and said total assets were up 20 per cent to $1.64 billion.
Chief executive Lachie McLeod said many smaller players would be forced to consolidate.
MORE FALLOUT
* Another finance firm went into receivership last night, the seventh to fail in the last year-and-a-half. Receivers PricewaterhouseCoopers would not name the company.
* A separate firm, Property Finance Group, was placed in receivership yesterday.
* Hanover Finance chairman Greg Muir says the Government must act immediately to restore confidence in the battered sector.
