PGC's Torchlight sells down Heartland stake amid probe into related party loans

Friday 6th July 2012

Pyne Gould Corp's Torchlight Securities today sold down about one-fifth of its stake in would-be bank Heartland New Zealand as it faces an investigation by the market regulator over its related party loans.

The Torchlight unit, which holds Pyne Gould's shares in Heartland and PGG Wrightson, sold 7.5 million shares on market for a total consideration of $3.75 million, according to a substantial shareholder notice. The sale reduces Torchlight's stake in Heartland to 7.8 percent from 9.8 percent, and follows a sale in May of 9.4 million shares.

Heartland's shares rose 2 percent to 50 cents after the sale. Also traded this morning were some 40.1 million shares, or 5.3 percent, in Wrightson, which changed hands at 30 cents apiece for a total turnover of $11.6 million. A substantial shareholder notice has yet to be released.

Wrightson's only shareholders with parcels that big are Pyne Gould and controlling shareholder Agria. The shares have since gained 6.7 percent to 32 cents. The activity comes two days after Pyne Gould lost a judicial bid to keep suppressed the details of an investigation over related-party lending between Torchlight Fund No 1 LP and Perpetual Trust.

The Financial Markets Authority is seeking to recover some $25 million in related party loans made by the Pyne Gould subsidiary as trustee of the Perpetual Cash Management Fund.

As at June 23, some $13 million remained outstanding. Pyne Gould managing director George Kerr requested a financial facility from the Perpetual Cash Management Fund in February, and needed board approval as it breached the fund's investment and credit criteria, according to a June 26 High Court judgment.

Pyne Gould's Perpetual unit disputes the FMA's interpretation, but has asked Torchlight to prepay the facility ahead of the scheduled February 2013 date, which it expects to be completed this month.

Kerr became involved in Pyne Gould in 2009, taking a cornerstone stake after the company faced large writedowns on the value of its Marac finance unit's property loan book, which has since been divested.

Since his involvement, Pyne Gould has taken stakes in the Kerr-managed Torchlight funds, which specialise in squeezing value out of distressed assets, and its board approved increasing the capital available to Torchlight to “seek modest investments beyond the Torchlight fund.”

Pyne Gould yesterday dashed reports its was looking to divest its Perpetual Trust unit and shift its primary listing to the ASX, saying a number of options are under consideration, but nothing has been decided on. The wealth manager's shares sank 6.9 percent to 27 cents, valuing the company at $58.5 million.Pyne Gould Corp's Torchlight Securities today sold down about one-fifth of its stake in would-be bank Heartland New Zealand as it faces an investigation by the market regulator over its related party loans.

The shares have since gained 6.7 percent to 32 cents. The activity comes two days after Pyne Gould lost a judicial bid to keep suppressed the details of an investigation over related-party lending between Torchlight Fund No 1 LP and Perpetual Trust.

The Financial Markets Authority is seeking to recover some $25 million in related party loans made by the Pyne Gould subsidiary as trustee of the Perpetual Cash Management Fund. As at June 23, some $13 million remained outstanding. Pyne Gould managing director George Kerr requested a financial facility from the Perpetual Cash Management Fund in February, and needed board approval as it breached the fund's investment and credit criteria, according to a June 26 High Court judgment.

An $18 million loan was approved, with security over five properties in Queenstown and Wanaka worth $21.6 million given by Torchlight, and further advances were extended without evidence of similar board sign-off. Pyne Gould's Perpetual unit disputes the FMA's interpretation, but has asked Torchlight to prepay the facility ahead of the scheduled February 2013 date, which it expects to be completed this month.

The loans were made as Kerr and US hedge fund Baker Street Capital wrapped up a takeover bid for Pyne Gould via Australasian Equity Partners No 1 LP, securing 76 percent of the company in a 37-cents-a-share takeover bid that closed in March. Kerr became involved in Pyne Gould in 2009, taking a cornerstone stake after the company faced large writedowns on the value of its Marac finance unit's property loan book, which has since been divested.

BusinessDesk.co.nz

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