Scheme of arrangement to get Provincial Finance going

Efforts to put stricken Provincial Finance back on its feet, or on crutches at least, are continuing, receiver John Waller of PricewaterhouseCoopers said yesterday.

PricewaterhouseCoopers and other parties involved in the receivership were still exploring options for getting the company back on its feet, including a "scheme of arrangement" under the Companies Act, Waller said.

"I've got nothing I can talk about publicly at this stage, but we're still working down that path," he said.

A scheme of arrangement is a formalised creditors pool, agreed to by a majority of creditors by number and 75 per cent by value who attend a special meeting called for the purpose.

If passed, it is binding on other creditors, who would then be prevented from taking independent action against the company to recover funds, such as applying for it to be placed in liquidation.

It would allow the company to continue trading but creditors would likely have to forgo some of their rights and their funds or the interest on them.

Waller was involved in a successful scheme of arrangement for retailer Smiths City when the company was placed in receivership in 1991.

The company went on to trade its way out of trouble and is now listed on the NZAX.

If Provincial is not lifted out of receivership it is likely the value of some of the assets listed on the company's statement of financial position will be severely reduced.

For example, the $17.5 million of deferred taxation listed in the statement "is dependent on Provincial generating future profits" Waller said last week.

Returns to 14,000 debenture stock holders, who are owed a total of $324 million, largely depend on the quality of the company's loan book.

The $323.5 million book, most of which comprises loans to used car buyers, is already marred by a $60 million provision for bad or doubtful loans.

Waller was continuing his work on the book this week, "to get good processes for collections in place".

There are a number of allegations that Provincial had been systematically targeted by gangs of fraudsters who took advantage of lax lending criteria.

However, Waller said he had not referred any issues to relevant authorities, "at this stage".