Finance companies fail to rescue firm Meads endorsed

A finance industry bid to rescue Provincial Finance, placed in receivership last week owing investors more than $300 million, has failed.

Edward Sullivan, of South Canterbury Finance, which was leading the attempt by a consortium of finance companies and investment advisers, said a revised estimate of Provincial Finance's recapitalisation requirement meant the rescue package had been unsuccessful.

"The receivers and trustees have reconsidered and increased the recapitalisation required from $31 million to $45 million," said Sullivan.

The initial estimate of what was required when the company first went into receivership was $27.5 million.

"We need to consider our own companies. We are concerned for Provincial's debenture holders and any flow-on effect this will have on the industry. But with the substantial increase in funding required, we have hit a brick wall and it is no longer prudent for us to continue with the plan."

Sullivan said there may still be an opportunity to rescue the company by a scheme of arrangement under the Companies Act.

"It may involve the debenture holders allowing part of their debentures to become equity. However, that is a matter for them to work through with Provincial."

All Black legend Colin Meads, who endorsed Provincial in television and print advertising for the past three years, said this week said he was terribly disappointed by the failure.

Christchurch-based Provincial came unstuck making risky loans to Auckland car buyers. Meads endorsed Provincial with catchphrases such as "Solid as, I'd say" and "For my money, you couldn't do better".

But several Provincial investors contacted the Herald expressing concern as to whether "unqualified celebrities" such as Meads had satisfied themselves that the businesses they agreed to promote were indeed solid.

Meads said he began working with Provincial three years ago.

"I knew the people involved. They were starting out and had a good track record. Up until this last six months they'd done terribly well.

"They've made one or two bad decisions and it's come unstuck. I'm terribly disappointed it's happened."

Provincial's receivers, PricewaterhouseCoopers, said yesterday that debenture holders were likely to recover "most if not all of their investments over time".

But one market commentator said a statement of the company's financial performance released yesterday by the receivers was "a best-case scenario".