KEY POINTS:
The failure of VTL Group subsidiary Nathans Finance is likely to drive Chancery Finance, another company owned by VTL Group, into liquidation.
And investors in Chancery have less chance of getting their money back than investors in Nathans.
Chancery stopped issuing bonds last year but still had $17
million to $18 million outstanding.
Graham Miller, managing director of Chancery trustee Covenant Trustee Company, said the trustee did not have the power to appoint receivers.
"We are not aware as to whether they have been put into liquidation but our expectation is that the company will go into liquidation," he said. "The only question is whether that's a voluntary liquidation on the part of the shareholders [VTL] or whether it's a creditors' liquidation which normally is by petition to the court."
As far as Miller was aware, Chancery had not yet failed to make a payment but "for all practical purposes I would be stunned if it has not ceased trading". Chancery would become the sixth finance company failure since the start of last year. The failures have led to calls for investors to focus more on whether they were being adequately rewarded for the risks involved in finance company investments.
Chancery investors would rank behind those of Nathans in terms of priority, he said.
Perpetual Trust, trustee to the deed with Nathans, yesterday appointed receivers PricewaterhouseCoopers partners John Waller and Colin McCloy. Nathans Finance was holding deposits of $166 million on behalf of 7000 investors, with a loan book of $170 million.
Perpetual was due to hold emergency talks with Nathans this week but over the weekend the Registrar of Companies declared Nathans to be "at risk". On Monday trading in VTL stock was suspended after the company said it was insolvent.
Perpetual chief executive Louise Edwards said the trustee had been investigating both Nathans and its parent VTL Group.
"After further discussions with the company, and as a consequence of VTL declaring itself insolvent and ceasing to trade, there was no alternative but to place Nathans into receivership," Edwards said.
Receiver Colin McCloy said it was too early to say how much money would be recovered.
"We'll continue to assess and analyse the financial position of the company over the next few days with a view to determining the realistic value which depositors can expect to recover," McCloy said.
VTL chairman Gary Stevens did not return calls yesterday, although the company stated it had funds to meet present obligations, including the payment of interest on Nathans' loans. As of July 31, VTL owed Nathans about $110 million.
The Securities Commission has launched an inquiry into Nathans and VTL.