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December 4, 2007 |
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CAPITAL + MERCHANT: Placed in Receivership on Agreement Breach Capital + Merchant Finance Ltd and Capital + Merchant Investments Ltd have gone into receivership due to breaches in respect of general security agreements issued by the companies in favor of creditor Fortress Credit Corporation (Australia) 11 Pty Ltd. Receivers have been tapped. Fortress appointed Tim Downes and Richard Simpson of Grant Thornton, chartered accountants, while trustee Perpetual Trust have called in KordaMentha, the New Zealand Press Association relates. Grant Thornton said they are currently working to gather as much information as possible and are unsure at this stage as to any outcome for investors. KordaMentha will finish up once Grant Thornton has secured money for Fortress, NZPA cites Perpetual Trust Chief Executive Louise Edwards as saying. According to reports, Capital + Merchant owes about NZ$190 million to 7,000 investors. Fortress reportedly has a prior charge over assets and was owed around NZ$70 million in total. As reported by the Troubled Company Reporter-Asia Pacific on Dec. 3, 2007, Fitch Ratings has placed the ratings of Capital + Merchant's Australian subsidiary, Cymbis Finance Australia Ltd, on Rating Watch Negative, following the appointment of C+M's receivers. Although domiciled in different countries, the owners of the two companies are linked and there is a degree of operational interaction between the companies, Fitch said in a rating release. “Both businesses operate similar business models in which retail deposit funds are primarily lent for relatively high-risk property development purposes.” The Capital + Merchant companies predominantly lend to the property and property development sector. Consumers' Institute's Statement The mandatory requirement for finance companies to have approved credit ratings should be brought forward following the collapse of Capital + Merchant Finance, the Consumers' Institute said in a press release. Capital + Merchant, operating in property finance, was one of the bigger finance companies in this country, yet mum and dad investors had little way of knowing or measuring the risk of what they were putting their money into. “The government has promised mandatory ratings in 2010 but 13 finance company failures in 18 months should be a strong enough signal that the industry needs to be more tightly regulated now,” Consumer CEO Sue Chetwin said. This month Consumer launched a fixed interest Web site, http://www.consumersaver.org.nz/terminvestments, aimed at helping people make sensible fixed-term investment decisions. “Interestingly Capital + Merchant Finance wouldn't respond to requests for information,” Ms. Chetwin said. However, it was obvious from its prospectus that it was in trouble. Finance companies that lend in the property sector should have a debt equity ratio of about six. Capital + Merchant Finance with NZ$219 million of assets had a debt equity ratio of 17.7. Consumer also believed the move to regulate who was allowed to be a director of a finance company should be brought forward. |
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