Rescue efforts under way for consumer finance company

Potential investors are confident they will be able to raise $11 million to help buy Christchurch consumer finance lender Provincial Finance out of receivership.

On Friday, Perpetual Trust, as trustee for the debenture holders, announced it had placed Provincial Finance in receivership and appointed PricewaterhouseCoopers as receivers.

The move was seen as the best way to protect the interests of the debenture stock holders, who had invested $300 million with Provincial, Perpetual Trust chief executive Peter Baynes said.

Early in April it had become apparent Provincial had breached certain covenants and ratios in its trust deed, and the trustee was also concerned at the adequacy of Provincial's provision for doubtful debts.

Mr Baynes acknowledged Provincial's shareholders had made strenuous efforts to address the problems.

A statement on Friday from Provincial chairman David Lyall and chief executive officer John Edilson said meetings were held that day with South Canterbury Finance chairman Allan Hubbard and others in the industry to put together a package to support Provincial.

"We have bent over backwards to accommodate its [the trustee's] concerns. Only two days ago we offered to inject a further $16.5 million into the company and sell $25 million of the property loan portfolio to South Canterbury Finance," the statement said.

"Over the last six months we have injected $27 million into the company so this was never something we were running away from. All I can say it that it is very disappointing that the trustee has chosen to act in this way."

Draft accounts for the year to March 31 had shown an after-tax loss of $36 million after providing for $85 million in bad and doubtful debts, Mr Lyall said.

It was now clear Provincial had expanded too rapidly into the area of motor vehicle finance and was experiencing a higher level of non-performing loans than anticipated. Recoveries had been further impeded by the slowdown in the sale of new and used cars, he said.

Today The Dominion Post reported that Perpetual Trust had said Provincial needed to find about $25 million to recapitalise.

A group of outside investors, including Mr Hubbard, the South Island's richest man, were working to raise an $11 million shortfall to help Provincial's management bail the company out.

It was understood several people had pledged $1 million each toward the rescue at a meeting on Friday in which Mr Hubbard was involved.

Mr Hubbard told The Dominion Post he believed the company could be saved and pointed in a different direction.

"It's really nothing to do with me but we are concerned for the old ladies and people who have money there. We'd like to see them get it back."

- NZPA