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Less than a week after telling the Business Herald it was in no danger of failing, Five Star Consumer Finance was placed in receivership on Wednesday night, becoming the seventh finance company to go bust in the last 16 months.
Richard Agnew of PricewaterhouseCoopers confirmed yesterday morning that he and colleague Anthony Boswell had been appointed as receivers for Five Star and subsidiaries Vintage Rentals, Vintage Finance and Beverage Finance.
The companies are believed to owe about $50 million to approximately 3000 debenture investors.
Five Star's board requested Covenant Trustee Co to appoint receivers "because of serious concerns as to the state of the debenture market and the ability of Five Star to attract new funds and retain existing investments".
Last Thursday, Five Star group general manager Wayne Wade told the Business Herald his company had "a minimal risk of receivership, due to its market of small loans to retailers' customers".
"Customers are able to more easily repay loans with low monthly payments."
Wade said last week that Five Star's reinvestment rate had "held up very well" in the weeks following Bridgecorp's failure earlier this year.
"However with the receivership of Nathans, investments may slow. To what extent it is too early to tell."
The company had a $60 million loan book and the company's most recent prospectus stated total liabilities were $58.8 million as at March 30 last year.
Wade was at the company's Mairangi Bay headquarters yesterday, but refused to come out of his office. He directed all questions to the receiver.
Agnew said it could take several days to gain an initial view of the company's position and the likely payout to investors.
While its small subsidiaries provided finance to the wine and hospitality industries, Five Star was primarily a consumer finance lender and was the "preferred supplier" of hire purchase finance to the New Zealand Retailers Association's 5600 members.
"If there's any contracts been written in the last few days there could be some issues," said association chief executive John Albertson.
"We're trying to get a handle on that at the moment. The biggest issue going forward is those members are now without a provider and we'll have to find an alternative source of financing for them. I don't think it's a huge disaster for sales potential going forward."
As with previous finance company failures, there will be little impact on people with loans or hire purchase contracts with the company. The receivers will continue to manage the loan book and collect payments in order to maximise returns to debenture investors and other creditors.
Five Star is largely owned by its directors Marcus Macdonald, Anthony Bowden and Nicholas Kirk through Antares Finance Holdings and Andromeda Investments.
Downfall
* Five Star Finance is the seventh finance company to fail in a deepening crisis for the sector that began last year.
* As late as last week the company gave assurances about its liquidity and future prospects.
* Its receiver says the company failed to secure sufficient new money or retain maturing debenture funding as the investing public increasingly steered clear of the troubled sector.
Cullen: Banking system 'sound'
Finance Minister Michael Cullen said there is no "systemic issue" with the nation's finance companies after the failure of seven firms in 18 months.
The banking system is "sound" and it is finance companies that make up the "riskier end of our financial sector", Cullen said in a speech in Auckland.
"They make up a much smaller portion of the overall system than subprime mortgages do in America and there is no indication of the same sort of systemic issue."
In June, Cullen announced that the Reserve Bank would become the regulator of finance houses and other non-bank financial institutions.
Institutions which take deposits from investors will have to obtain and disclose a credit rating.
- Bloomberg
