Paynter, Somers-Edgar behind latest Ballantyne 'rescue' deal

Friday 8th December 2000

BAIL OUT: Doug Somers-Edgar (left) and Richmond Paynter's company is offering to come up with a $1 million unsecured interest-free loan and a $1.5 million mortgage

By Chris Hutching

Christchurch businessman Richmond Paynter and Money Managers managing director Doug Somers-Edgar are behind the latest offer being made to bail out the Ballantyne property bond issue, whose assets were placed in receivership in June after defaulting on repayments.

Mr Paynter is known for his retirement residence developments in Wellington and Christchurch and for his chairmanship of troubled dotcom company E-Force, which is downsizing its activities after losing $2.9 million in the year to August 2000.

Mr Somers-Edgar is well known for his investment advisory and fund management activities. His company, Money Managers, originally promoted the Ballantyne bond to clients.

Now he and Mr Paynter are behind a company making an offer to come up with a $1 million unsecured interest-free loan and a $1.5 million mortgage arranged through a bank.

The money will used to kick-start a new marketing campaign to sell sections valued at $100,000 at the stalled Ballantyne development near Katikati.

The deal will not repay the original $8 million capital invested by the 600 bondholders let alone the promised interest of another $4 million.

The maximum investors will collectively receive back is $6.28 million under the rosiest scenario, due to a new and separate offer this week by a party interested in buying the adjacent golf course part of the development for $1.5 million.

But there are fishhooks. Under the deal put to trustee Tower Trust any unsold sections at the end of a three-year period may be passed back to bondholders. This creates the possibility that the prime sections in the development will be sold, leaving bondholders with the balance.

Repayments to bondholders rank well behind legal fees and real estate fees and a management fee including 10% of gross sale proceeds that will go to Messrs Paynter and Somers-Edgar's company.

The trustee's fees must then be satisfied, followed by repayment of the first and second mortgages, and last come the bondholders.

Tower Trust has also received another discounted but more straightforward unconditional cash offer of $3.65 million.

A Tower Trust spokesman said while the cash offer was more straightforward there were many bondholders who would be reluctant to accept the upfront loss. Tower Trust itself has been on the receiving end of criticism from some bondholders who misunderstood the role of the trustee and assumed some kind of liability rested with the company as trustee.

But Tower Trust's role is simply to ensure the trust deed is complied with.

Under its mandate, Tower Trust has an option to cease involvement in the development as soon as bondholders accept the rescue package. But it is planning to maintain its current role and oversee the completion of any such deal.

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