C+M investors looking at getting 10% back

Wednesday 28th May 2008

Investors in failed finance company Capital + Merchant may get back less than 10 cents in the dollar, the receivers say.

KordaMentha, the Second Receivers, say that the insurance policies that were in place to underwrite a portion of the loans that may have been invalidated by C+M's securitisation process.

"Some complex issues have arisen concerning the securitisation processes that Capital + Merchant Finance followed prior to receivership and these are taking some time for us to work through," they say.

It says it is still too early to tell whether or not recoveries, on a loan-by-loan basis, will be possible under the insurance cover.

"There are significant concerns that the securitisation undertaken by the company may have invalidated the insurance on a substantial portion of the company's loan book."

Also debenture holders rank behind C+M's wholesale funder, Fortress Corporation.

Debenture holders will not be paid anything until Fortress has been fully repaid.

KordaMentha says there have been significant losses when loans have been repaid because of the poor state of the New Zealand property market.

It says difficult economic conditions are affecting liquidity and property values, and that "will result in significant losses being suffered on the majority of loans."

To date the first receivers have only achieved a modest level of loan recoveries and asset realisations.

"From the information that we have access to we are presently of the view that the recoveries, once Fortress has been repaid, might be as low as under 10 cents in the dollar. This excludes any recoveries obtained under the insurance cover (if such is available) and from any claims that may be able to be made against parties who have been involved with the company and which are being investigated as a matter of course."

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