Bridgecorp Collapses

[f1speedman]

http://www.stuff.co.nz/4115843a10.html

Finance company Bridgecorp Limited has collapsed, leaving about 18,000 mainly "mum and dad" Kiwi investors unsure of the fate of nearly $500 million they have invested with the company.

The receivership is the biggest of its type in recent years and dwarfs the collapses last year of Provincial Finance, Western Bay and National Finance 2000. Bridgecorp, and its subsidiaries were placed in receviership last night at the request of its directors after after defaulting on loan repayments five days ago, breaching terms of its trust deed. The company raises money from the public and lends it to property developers who have generally failed to get funding from banks.

There are more than 18,000 investors with term investments worth close to $600 million in New Zealand maturing continuously over the next five years. Sydney-based parent company, Bridgecorp Holdings and its finance arm Bridgecorp Finance, also have a swag of investors......

http://www.stuff.co.nz/4115843a10.html for more details

How will this affect the market, and more importantly, what are the underlying causes??

Cheers

Dave

[BusyLizzy]

I did a search on Bridgecorp to see what came up and found this quote from the Herald back in January entitled "Could the crash happen again?" - an article which I had posted (but had long forgotten about...)

Rod Petricevic, founder of crash victim Euro-National and now head of private finance company Bridgecorp, says anybody who was still in business today and operating under the current market conditions is better for learning from the experience of it all. "We're older and wiser for the experience. And investors are more savvy. We survived and in the process learned the hard lessons of the eighties and business is better for it."

http://www.propertytalk.com/forum/sh...ght=bridgecorp Sounds like he didn't learn from it after all.....

[toby]

One does wonder what actually happened.
I smell a rat, after all I wouldn't of thought the builders market has hit the wall yet, at least not across the entire nation.

[essence]

Bridgecorp collapse spreads to Australia

http://www.stuff.co.nz/4117599a13.html

Meanwhile, international ratings agency Standard & Poor's is warning that the Bridgecorp collapse could have spill-over effects on New Zealand's "extraordinarily large number" of finance companies.

[RentMaster]

It just goes to show how you have to be very careful when investing.

If this company had set up a kiwisaver fund, all those people will have lost their kiwisaver funds as well. Apparently the government does not guarantee the funds will be safe or provide any backstop if a kiwisaver provider goes under. So be careful who you choose.

[donna]

I wonder if anyone here lost anything with the collapse?

Cheers,

Donna

[revdev]

You're 'avin a laugh mate!

I wonder if anyone here lost anything with the collapse?

I wondered the same thing Donna...but you would have to be mad to invest CASH into non-bank finance company showing 8.5 - 9% return for 2 years or whatever it is. I'd want a hell of a lot more than that for the risk.

G

[roseneath_rat]

Finance companies in NZ have underpriced for their risk for a long time now. The perception by investors of risk has been much lower than the actualities. In the case of Bridgecorp these were largely "secured" investments backed by mortgages... that we all know are 'safe as houses!!'

[sarahd]

Andrew

If Kiwisaver funds invest in fixed interest investments, it will be many and a variety of them, spreading any investors risk.

Kiwisaver funds probably have instructions to invest in higher grade investments which would probably exclude the Bridgecorp type of inivestments anyway.

The Kiwisaver funds are also governed by the Kiwisaver Act and Superannuation Scheme act which menas they have certain reporting criteria, are under the guidance of Trustees etc, so I don't think you should compare an individual directly investing their lumps sums 'bridgecorp' to investing in a diversified Kiwisaver fund.

Sarah

[Josko]

Fiji plan critical to Bridgecorp investors' outlook

By JENNI MCMANUS - Sunday Star Times | Sunday, 29 July 2007

Bridgecorp receivers John Waller and Colin McCloy of PricewaterhouseCoopers will next week give investors their first formal update since the beleaguered financial company collapsed on July 2, owing between $500 and $600 million.

Waller said the complexity and size of the loans made in several jurisdictions made it difficult for receivers to be definitive about numbers, especially so early in the receivership.

"It is not a straight, vanilla situation," he said. "But we will try to tell investors what's in the accounts and ranges of where recoveries could be."
Investors will be sent individual copies of the receivers' assessment and it will be posted on their website.

Critical to investor returns will be Bridgecorp's property development at Momi Bay, in Fiji. Nearly $50m in investor funds has been ploughed into this project but work has been halted since last December. Stage one of the project has yet to be completed and titles have not been issued, meaning sales contracts are yet to be settled.

Waller says the receivers have had approaches from potential funders and is "optimistic at this stage that we can do something". But the receivers have not yet determined how much might be needed for completion. Overlaying this is the continued political uncertainty.

"It's not all negative but it will take time and it is difficult," Waller said. "We need to properly understand the structures, work out what we are trying to achieve and put good governance in place. We need to be objective and optimistic about Fiji. It deserves a lot of effort because there is a lot of value there."

A small amount of work has resumed on the Golf House at Momi Bay - a clubhouse that was part of the initial concept.
The original plan for the resort included 380-400 residential sections, a JW Marriott hotel, nine holes of an 18-hole championship golf course, and what Bridgecorp described as "significant infrastructure".

http://www.stuff.co.nz/4144617a6445.html

[BusyLizzy]

Investors given 'kick in the teeth'

Thousands of investors owed $460 million by the collapsed Bridgecorp finance company will have to wait at least six months to see any money - and may receive just a quarter of their funds.

Receivers appointed in July to probe the group's collapse had grim news yesterday for the 14,500 secured debenture holders - mainly "mum and dad" investors.

John Waller and Colin McCloy, partners of PricewaterhouseCoopers, also said they had "identified a number of matters" that could give rise to breaches of the Securities Act and would be referred to the Securities Commission.

The commission watches over matters such as the prospectuses companies use to raise funds from the public.

"We realise this will come as a shock to investors and the outcome obviously is disappointing," Mr McCloy said.

He would not give any time frame for payments - but said it was unlikely any money would be paid back for at least six months.

In the worst scenario investors might get as little as 25 cents in the dollar; in the best it might be about 74 cents.

That estimate of 25c to 74c is lower than for two finance companies put into receivership last year.
Provincial Finance debenture holders may get 90c to 95c in the dollar back, and investors in Tauranga's Western Bay Finance, 75c in the dollar.

Secured investors in National Finance, also in receivership, have been told they may get 45c in the dollar.

Investors were struggling last night to digest the news of a potentially low payout. Shirley and Neville Field, of Cromwell, had about $26,000 with Bridgecorp.

"It is a kick in the teeth, but if that is all we are going to get then that's it," Mrs Field said.

The couple also had money with Provincial Finance, which owed investors $300 million when it collapsed.
"I've had a gutsful of finance companies," Mrs Field said.

Ann Clarke, of Napier, was a week away from getting her $40,000 in Bridgecorp back when the company went into receivership.

"I'm hoping I'll get 74 cents (in the dollar) but I won't be happy if I get 25c," she said.

Bridgecorp operated on both sides of the Tasman, raising funds from mainly "mum and dad" investors to finance property projects.

It struck problems last year when it was blocked from raising any more funds from the public in Australia.
The problems were compounded when a resort development in Fiji was disrupted by the December coup.

A report from the receivers to investors says the company has $393 million lent to 69 parties in New Zealand, Fiji and Australia.

The receivers say that parts of the loan book were previously sold to other financiers to pay for principal and interest payments to Bridgecorp's investors. This had left a loan book "which is more difficult to recover".

They have split the loan book into $157 million of Australian and Fijian loans and the rest in New Zealand.

They estimate 25c to 40c in the dollar could be recovered from the New Zealand loans.

If all the overseas loans were recovered, and put with a possible 40c from the New Zealand loans, this would give a potential total payout of 74c in the dollar.

http://www.stuff.co.nz/4147950a10.html

[Dean@Massiveaction]

Momi is in receivership now. Rod P must have his "4000 apartments with an average value of 500K each" well hidden in trusts.

[OllyN]

A Life Line For Some

MFS Ltd's New Zealand subsidiary says it will compensate clients for any losses they sustain after their advisers put money into failed finance company Bridgecorp.

The sum is thought likely to run into several million dollars but it's not known what the shortfall will be when Bridgecorp receivers complete their task.
Bridgecorp went into receivership in July owing investors nearly $500 million.
MFS Australia bought Vestar last December. It has been the subject of recent media scrutiny because of the many clients whose money was invested in Bridgecorp and other failed finance companies.
With around 6000 clients it is New Zealand's second largest financial advisory firm after Money Managers.
Industry sources believe up to 60% of Vestar's client funds under management is invested in finance company debentures.
MFS New Zealand chief executive Jason Maywald told Wellington barrister James MacFarlane last week details of compensation would be outlined to Vestar clients before Christmas. Maywald was locked in meetings yesterday and unavailable for comment.
MacFarlane wrote to MFS boss Michael King in Australia earlier this month about possible moves investors might take to recover their money, including a class action. He also mentioned the reputational harm MFS had suffered as a consequence of buying the problematic Vestar.

Read more:

http://www.stuff.co.nz/4255733a23399.html

[captaincrab]

I love that name Exposing Unacceptable Financial Advice. Do they give out tee shirts and capes?
MFS are onto it. Cheaper to settle than risk an Insurance claim. I've mentioned before the possible breach of fiduciary duty these advisors have committed and I reckon the way forward is for the investor to have a go at their insurers.
As an advisor they should have to have Professional Indemnity Insurance, probably not less than $5 mio.
I think even Mortgage Brokers have to have that much to belong to the MBA.
Anyway, MFS can probably see that its easier to sort it out now, rather than risk their future ins requirements and taint their advisors reputations even more with a nasty Court case against their insurer. Of course they are lucky in that they can probably afford to pay and just write that Quarter off as a bad one. Long term it mey do to bolster their reputation as I suspect all the little Financial Advisors are going to go under.....

[sarahk]

I just found this thread.

My mother lost 20k and when challenged her Financial Planner ranted about "his mate Andy" who had worked at Bridgecorp and how hugely respected he was and how if "Andy" had stayed at Bridgecorp (he left in March 07) all would have been well.

I'm gutted that her funds were invested on the basis of one strong individual and not because the company was strong.

All people in a company are expendable - they can "disappear" quickly and without warning through tragedy or just because some other opportunity beckons.

To invest "other people's money" on the basis of a single individual is ethically wrong. Is it criminal?