Park Tce bondholders corralled by a trio of forces against them

By Chris Hutching

Friday 26th April 2002

BEAUTY AND THE BEAST: The Park Tce apartments are located in one of Christchurch's most beautiful settings but have been troubled by investment failure

Tower Trust presented a Hobson's choice for the bondholders in the Park Tce Property Bond facing a buyout offer returning them 67-70c in the dollar.

In case anyone missed the point, Tower, as trustee for the bondholders' interests, also provided them with another proxy voting form last weekend if they had already sent one in and wanted to change their mind for the vote held mid-week.

Tower's letter to the bondholders last weekend told them in no uncertain terms of the forces aligned against them from three sources. The first-ranking creditor, Bank of New Zealand, owed $4.46 million, was threatening to take action that would probably result in a mortgagee sale. A second creditor, owed $2.36 million and understood to be Mainzeal, was threatening to wind up the defaulting development company, Park Tce Developments.

In addition, the development company was itself threatening to tender the unsold 45 apartments out of the total of 102, which would effectively have the same result as a mortgagee sale.

Tower advised bondholders in its letter that they should seek independent legal advice if they chose to reject the buyout.

Behind the scenes the advisory firm that helped the investment, Money Managers, had sought to lift the offer from Christchurch developer Phillip Burmester.

But in the end this was a troubled investment that all the interested parties want to see resolved given the adverse media attention following its tortured course. Tower is owed $140,000 for administration fees, legal and other costs.

Sadly, those with the most to lose were bondholders whose investment confidence has been dented although they have probably learned a hard lesson about the association between higher returns and higher risk. The par value of the investment to the 657 bondholders was $7 million but with interest and accrued penalty interest they are owed $9.8 million. First-ranking security holder BNZ is owed $4.46 million. The total offer from Mr Burmester is $9.8 million.

The investment failed because many buyers of the Park Tce apartments in Christchurch failed to settle, citing a hard- sell campaign which led them to believe they would be able to sell the apartments before settlement date. The development company has taken legal action against some but abandoned action where it appeared pointless.

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