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Dominion Finance to ask for moratorium for Dom Finance and North South
This is a surprise. Was seen as well run and relatively conservative
12,000 investors with over NZ$250 mln
Problems getting money out of residential property developers
Debenture reinvestment rate at 25%
Biggest loan was NZ$26 mln to a property developer in Queenstown
45% of loans for residential property development
Down from 60% a year ago but still heavily reliant on property sector
Money go round and the music stopped
Volumes for property sales down 50%
Any sort of resort or investment property sales have almost stopped
Can't extract cash from developments
Dom Fin said in May only need to get back 38% of their money from loans in next year to payout debentures
Was confident it could make it
Big blow for debenture investors and for stock market investors in Dom Fin
Share price has dropped from $2.40 last year to 50 cents before shares suspended
Big losers here are husband and wife team of Terry and Ann Butler who owned 61% of Dom Fin
Other shareholders included renowned South Island investor Allan Hubbard
He and South Canterbury Finance owned 8% of it. ACC owned 1.7%
So what happens now
Wait for moratorium deal involving trustees and Banks
Trustees are Perpetual Trust for Dominion Finance and Covenant for North South
Banks are HBOS and ASB
Moratoriums used a lot more lately
Geneva Finance and MFS successfully got debenture holders to vote for them
Big blow for the sector
Reinforces two tier nature
Investment grade in one corner with reinvestment rates of 70% plus
UDC, Marac Finance, South Canterbury
Non-investment grade have reinvestment rates of less than 50%
Hanover, Strategic, Dorchester Pacific and St Laurence
Tough times ahead
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