Vision Securities, sunk by failed loan settlement, covered by govt guarantee

Thursday 1st April 2010

Vision Securities, the specialist retirement village property lender, has been sent to the receivers after it failed to settle a major loan last week. Its 953 investors will be safe as they are covered by the government’s retail deposit guarantee.

Trustee Perpetual Trust called in receivers Rod Pardington and David Levin of Deloitte after Vision failed to settle a mortgaged property last week that was expected to generate some $6.75 million and keep it afloat. Vision’s directors told Perpetual’s head of corporate trust Matthew Lancaster they believed the company would be unable to meet its ongoing debenture obligations.

“The directors report that the company’s borrowers are finding it increasingly difficult to refinance or repay their maturing loans,” Lancaster said in a statement. “VSL has concluded that receivership is the best option to protect all investors and to ensure all investors are treated fairly.”

In February, Vision was put into the high risk category by rating agency Standard & Poor’s, which issued it a B credit rating with a negative outlook, amid the flurry of companies lining up to meet Reserve Bank regulations that require non-bank deposit takers to be rated.

Today’s announcement prompted S&P to downgrade the company’s rating to a D, with any further write-downs of the company’s loan book likely to breach its trust deed.

Still, the company’s investors who are owed about $28 million will get all of their money back under the terms of the government’s deposit guarantee. The existing guarantee repays investors, with the government taking their position as creditor as the receiver tries to squeeze value from the wind-down of the business.

Treasury director of financial operations Brian McCulloch said he expects an orderly process of payment to debenture holders.

Vision Securities joins Mascot Finance and Strata Finance in calling on the government scheme. The Treasury has made a provision of $771 million for the deposit guarantee, according to the financial statements ended January 31.

Businesswire.co.nz

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