Rates Round Up
Credit Sails costs investors; Payments delayed for Lombard investors; Dorchester cuts loss on end of year adjustments; Non-banks suffer from weak market.
Monday, 18 May 2009
by Paul McBeth
Credit Sails notes cost kiwis $91 million
Investors in the convoluted bond issue that relied on momentum notes will see a return $11.96 for every $1,000 the put in - a loss of almost 99% on the bonds called Credit Sails first issued in 2006.
The collapse of an Icelandic bank last year kicked off the troubles for Credit Sails, which were effectively a collateralised debt structure, and wiped 71% of their value.
More than 1500 New Zealanders invested in the notes, with 56 of these putting in $100,000 or more.
Payment delayed for Lombard investors, IRD lines up claim
Receivers John Fisk and John McCloy of PricewaterhouseCoopers told investors the delay was due to the IRD's ongoing audit of the company's dealings.
Any claim made by the IRD takes precedence over all other claims.
Dorchester cuts loss on end of year adjustment
Executive director Paul Byrnes said the additional property loan provisions weren't anticipated at the time of approval of the Deferred Repayment Plan, and "reflect a more negative view taken by independent valuers of the current market."
Byrne reiterated the objective of the plan is to carry out an "orderly realisation" of the company's assets, and avoid a fire sale.
Its subsidiary, Dorchester Finance, purchased the Goldridge Hotel in Queenstown for $8 million, and later bought a mortgage from New Zealand Guardian Trust for NZ$6.3 million for a hotel property on Riccarton Road in Christchuch. Byrne said they've made good progress on the exposure to their hotel properties.
Weak property market and economy weighing on non-bank sector
A significant number of non-banks have taken part in the the government's deposit guarantee scheme, the central bank said in its financial stability report.
Savings institutions, like building societies, credit unions, and the PSIS, were generally well-capitalised, but a number of other companies needed to strengthen their balance sheets to meet the new prudential regime's standards.
The bank is concerned some international non-bank lenders, such as GE Money, have withdrawn from New Zealand, preferring to rely on wholesale funding overseas.
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