Days to tally debts of failed finance company

Thousands of retail investors in failed car finance company National Finance 2000 will be on tenterhooks for several days as they wait to learn what proportion of the firm's $25 million in outstanding debenture bonds will be refunded.

National Finance 2000 and affiliated used car company Payless Cars, both headed by Allan Ludlow, were placed in receivership on Tuesday owing investors and suppliers tens of millions of dollars.

Receivers Colin McCloy and John Waller of PriceWaterhouse Coopers were yesterday sifting through the firms' accounts to establish the assets and extent of the debts. Mr McCloy said the company's 2026 debenture holders were owed about $25 million but he was unable to say how much of that they would get back.

"It will take a few days just to get an initial view."

Used car importer Nichibo NZ is owed "well less" than $1 million by Payless Cars, according to chief executive Robert Young.

Mr McCloy said he and Mr Waller were writing to debenture holders yesterday and today to inform them of National Finance's situation.

Mr Ludlow has said he will work closely with the receivers to get the maximum amount of money back for investors.

National Finance provided loans to customers purchasing vehicles from Payless Cars' four Auckland yards which had closed by yesterday.

Many commentators had raised concerns in recent months about Mr Ludlow's use of National Finance funds to pay for imported cars.

Graham Miller of National Finance's trustee, Covenant Trustee Company, said problems with the company had been identified as early as March when measures were taken to protect investors' funds.

"But it was from that point until now before we finally came to the conclusion that the problem wasn't fixable."

National Finance's failure has sparked fears of further casualties in the fast-growing finance company sector but Mr Miller said the circumstances of the company's failure were "very specific to the way they operated, their related operation with Payless Cars".

"In my view it should not be seen as some sort of systemic problem."

Until recently Mr Ludlow featured in a series of prime time TV and radio advertisements offering investment opportunities to debenture holders who were being paid out after the purchase of Pacific Retail Finance by US giant GE Money.

Kapiti Coast sharebroker Chris Lee, who ranks finance company debentures on his website, gave National Finance the E grade reserved for those which, among other things, had inadequate capital, failed to satisfy him that the lending policies are sound, or were too small and vulnerable to adverse market conditions.

He wrote last year in his newsletter that National Finance 2000 "must be an E on my grading scale, despite the affability of the car dealer who visited me and runs the company".

Last week Mr Ludlow told the Herald National Finance had no problems meeting its interest payments to debenture holders or paying back the principle when debentures matured.

- Additional reporting Errol Kiong