Lombard Gone

[OllyN]

Another finance company in trouble
Thursday, 03 April 2008

REAKING NEWS: Lombard Finance & Investments Ltd said it has suspended all payments of capital and interest to investors.
"It is clear from recent events that this is a systematic failure of an entire industry, and from our perspective a moratorium is now the only responsible course of action," said chief executive Michael Reeves.
The finance company will seek a meeting of its secured debenture holders at which it will propose a moratorium in respect of its payment obligations to holders of secured debenture stock, subordinated capital notes and subordinated notes.
The company hopes that during the moratorium it will be able to pay capital and interest when it is prudent to do so as funds permit.
Mr Reeves said that business confidence, which had fallen since the Bridgecorp collapse in July 2007, deteriorated markedly over the last month.
He cited a downturn in real estate values, a lack of sales and a lack of bank finance available to borrowers due to the impact of the international credit squeeze as problems.
"In recent months our borrowers have found it increasingly difficult to sell properties and equally difficult to refinance their mortgages and repay their loans to Lombard Finance.
"As a result Lombard Finance in turn is unlikely to be able to meet its obligations to investors as they fall due in late April or May."
"I and rest of the board very much regret this has occurred and the anguish this will cause investors," Mr Reeves said.
"However, we believe the interests of investors are best served by a moratorium to enable an orderly realisation of its loan book."
Mr Reeves said that at the end of March the amount owed to investors, in order of priority, was $111 million to holders of secured debenture stock and $16 million to holders of subordinated notes and subordinated capital notes.
The book value of loans outstanding amounted to $143 million but the recovery of this full amount will be affected by the financial conditions that have led to the moratorium.
KordaMentha have been engaged by the company to provide an overview of the moratorium.
Mr Reeves confirmed that there was no related party lending and that all mortgages were over property in New Zealand.
The company has suspended a prospectus it has in the market.
Lombard Group said it does not expect the moratorium to have an impact on the group's other businesses.
Lombard Group Ltd listed on the NZX in December 2005. It announced a six-month loss of $3.5 million late last year. The group's chairman is Sir Douglas Graham and former Labour Party cabinet minister Bill Jeffries is a director.
The group's other businesses include Maestro Commerce Ltd, Tasman Mortgage Group and United Home Loans.
- NZPA

Could the BlueChip defaults have anything to do with this??

[Commercial Dan]

Gone and a few more casualties on their way.

[Dean@Massiveaction]

And they own United and Tasman so this could be scary.

[Commercial Dan]

I agree, the crap is hitting the fan, this is going to be one of the worst debt crisis' in history.

[Green Fish]

Not necessarily. Although a particular finance company might be insolvent, it still has its loan book, and its securities. If the finance compnay has been operated properly, there is a good chance of the investors getting most of their principal back - in the fullness of time.

I don't know if anyone remembers the collapse of SecuritiBank in the late-70s. In that case, the secured investors go most of their money back (many years later).

[Dean@Massiveaction]

I was thinking more of trying to borrow money as an investor. Every time one gets an approval the company disappears :-)

[cube]

Not necessarily. Although a particular finance company might be insolvent, it still has its loan book, and its securities. If the finance compnay has been operated properly, there is a good chance of the investors getting most of their principal back - in the fullness of time.

Current estimate for Bridgecorp is 16c in the $

[Green Fish]

I'm sure that if you went through the Bridgecorp loan book, property by property, it wouldn't look like 16 cents to the dollar return, despite the turn in the market and despite the second mortgage as security.

I'd be looking at "related party transactions".

[alliantGTR34]

so much for "Invest wisely. Live well"

[drelly]

I got all my money back after AIC collapsed in the late 80's. Of course it took 10 years and had less than half the buying power by the time I got it all...

[snap]

Another finance company in trouble
Thursday, 03 April 2008

REAKING NEWS: Lombard Finance & Investments Ltd said it has suspended all payments of capital and interest to investors.
"It is clear from recent events that this is a systematic failure of an entire industry, and from our perspective a moratorium is now the only responsible course of action," said chief executive Michael Reeves.
The finance company will seek a meeting of its secured debenture holders at which it will propose a moratorium in respect of its payment obligations to holders of secured debenture stock, subordinated capital notes and subordinated notes.
The company hopes that during the moratorium it will be able to pay capital and interest when it is prudent to do so as funds permit.
Mr Reeves said that business confidence, which had fallen since the Bridgecorp collapse in July 2007, deteriorated markedly over the last month.
He cited a downturn in real estate values, a lack of sales and a lack of bank finance available to borrowers due to the impact of the international credit squeeze as problems.
"In recent months our borrowers have found it increasingly difficult to sell properties and equally difficult to refinance their mortgages and repay their loans to Lombard Finance.
"As a result Lombard Finance in turn is unlikely to be able to meet its obligations to investors as they fall due in late April or May."
"I and rest of the board very much regret this has occurred and the anguish this will cause investors," Mr Reeves said.
"However, we believe the interests of investors are best served by a moratorium to enable an orderly realisation of its loan book."
Mr Reeves said that at the end of March the amount owed to investors, in order of priority, was $111 million to holders of secured debenture stock and $16 million to holders of subordinated notes and subordinated capital notes.
The book value of loans outstanding amounted to $143 million but the recovery of this full amount will be affected by the financial conditions that have led to the moratorium.
KordaMentha have been engaged by the company to provide an overview of the moratorium.
Mr Reeves confirmed that there was no related party lending and that all mortgages were over property in New Zealand.
The company has suspended a prospectus it has in the market.
Lombard Group said it does not expect the moratorium to have an impact on the group's other businesses.
Lombard Group Ltd listed on the NZX in December 2005. It announced a six-month loss of $3.5 million late last year. The group's chairman is Sir Douglas Graham and former Labour Party cabinet minister Bill Jeffries is a director.
The group's other businesses include Maestro Commerce Ltd, Tasman Mortgage Group and United Home Loans.
- NZPA

Could the BlueChip defaults have anything to do with this??

Or Bryers defaults...

He was into Lombards for millions with security on his BC shares that are worth jack now

[Ma Kettle]

Might not be as bad as the others

Morning all. I was badly singed by Bridgecorp and these people don't seem like they're cut from the same cloth. Now I've read all the stuff online it seems like they are still in ok shape but know it can't last. If Bridgecorp had a moritoreum then I might have got our in better shape. My girls a solicitor and told me that a moritoreums more of an accident avoidance measure rather than a car crash. MFS Investors (according to the Herald) just voted for one so maybe they're right. Seems better than burying your head in the sand like Bridgecorp.

What do you think Olly? You're one to trust.

[OllyN]

In Reply

Ma Kettel

In my view a moratorium is a self inflicted receivership. Some companies come right but most will just fade away while waiting to be picked over by the vultures.

Either way more and investors funds are just evaporating or being locked away long term.

Worse still your "friendly" finance companies will not be lending and will not be rolling over loans as they come due.

Stay out of developments, avoid rolled up interest loans, and only buy investment property that produces cash returns from day one.

I fear that there will be more collapses to come. Opportunities for some. Bad luck for others.

[muppet]

Lombard flags new pressures on finance sector
by Greg Ninness - Sunday Star Times | Sunday, 06 April 2008

THE COLLAPSE of Lombard Finance could be a tipping point for the finance sector because it is the first finance company to fail as a direct result of the property downturn.

McDouall Stuart finance sector analyst John Kidd said other failures had been caused by their inability to attract new money from investors.

Lombard ran into trouble because its property developer clients could not repay their loans from the company.

Over the past two years 17 finance companies holding more than $2 billion in investors' funds have gone to the wall.

"Until now, the problems finance companies have run into have been at the funding end," said Kidd.

Debenture flows and roll-over rates had been weak and that was where finance companies had felt the greatest pressure.

"Lombard's announcement is quite interesting because they have referred exclusively to the fact that the quality of their lending book has deteriorated to the point where money coming in won't enable them to cover money going out next month."

Lombard's main area of business is lending to property developers, and chief executive Michael Reeves blamed the property slump for the company's woes.

"In recent months our borrowers have found it increasingly difficult to sell properties and equally difficult to refinance their mortgages and repay their loans to Lombard Finance," Reeves said when he announced the company could not repay its 4400 investors, who are owed around $127 million.

Kidd believes more finance companies could start coming under similar pressure.

"In the last couple of months we've seen the property market soften and a lot of finance companies lend heavily in that space," he said.

"You might see a bit of a compounding effect of the pressures that might be felt from here on in.

"You've got funding pressure and now at debt end of the book you've got lending quality pressure as well. It's another level of stress finance companies are going to be subjected to."

Kidd said a number of finance companies had ridden the property wave for the last 10 years.

Developers involved in commercial property projects or new subdivisions would start to come under pressure and that would flow through to their financiers, he warned.

Those pressures are also likely to affect the returns received by investors in finance companies that have already gone bust.

Lombard's failure capped a week of hell on the finance front with a string of receivers delivering bad news to long-suffering investors.

Receivers for Bridgecorp and Five Star Consumer Finance all reduced their estimated payouts to investors last week, while receivers for Nathans Finance said their payout would take longer than expected.

Bridgecorp's receivers said investors would probably only receive between 16% and 51% of the money they invested, compared with their previous estimate made just three months ago of 19% to 63%.

They laid the blame squarely at the door of the weakening property market.

"A number of the loans relate to properties which were sold during the March 2008 quarter," they said in a letter to investors. "These properties realised significantly less than earlier estimates, due to the weaker property market and as a result, loan recoveries were lower than anticipated in December."

PILING ON THE AGONY

Investors hoping to salvage some of their money from finance companies which have fallen over received an avalanche of grim news about their likely payouts last week:

Bridgecorp's receivers reduced their estimate of the amount investors would be likely to receive to between 16% and 51% of the amount originally invested, down from their December estimate of 19% to 63%. Bridgecorp owes $458.7m.

Five Star Consumer Finance's receivers reduced their estimated payout to investors to 25%, compared with their earlier estimate of 40%. The company owes $51m.

Nathans Finance receivers said any payout to investors would take longer than expected. The company owes $166m.

Capital + Merchant's receivers advised investors they would probably get only 59% of the money they originally invested, and that conditional on specfic events occurring. The company owes $165m.

Lombard Finance said it would be unable make interest and capital repayments as they fell due. It owes investors $127m. Kapiti Coast investment adviser Chris Lee estimated that unsecured investors would get nothing back and investors in Lombard's secured debentures may only receive 30% of the amount originally invested.

MFS Pacific Finance had no news for its investors last week after earlier promises that it would have a moratorium proposal to them by late last month. It suspended interest and capital repayments on $290m of investors' funds in early February.

http://www.stuff.co.nz/sundaystartim...4877a6445.html

[Glenis]

Building Societies - are they safe?

I'm not sure if this is the right place to ask but .......

My elderly parents lost money with Western Bay finance (although thankfully not as much as some people have lost with other finance companies). They have what is left of their savings invested with a Building society. Since everyone here seems to be pretty well informed I thought I'd ask for everyone's opinion. Are building Soceties safe? They have about 2/3rd's coming to the end of the term deposit and I've advised better safe than sorry and to put it in the bank - there isn't much difference in interest anyway.

Anyone have an opinion?